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100% no-deposit mortgages are back

Skipton Building Society has introduced a 100% no-deposit mortgage, which allows renters to buy their first home without a deposit. Here's everything you need to know about the new no-deposit mortgage.

Guest Author
Words by: Nicky Burridge

Contributing Editor

100% no-deposit mortgages have made a return for the first time since 2008.

It means first-time buyers can step onto the property ladder without saving for a deposit or having a guarantor.

Instead, first-time buyers must show they have paid their rent on time for the past 12 months. They must also meet the lender’s credit score and affordability criteria.

Skipton Building Society's Track Record Mortgage is aimed at first-time buyers who are currently renting.

The Track Record Mortgage offers a fixed interest rate of 5.49% for five years, with a maximum term of 35 years.

What is a 100% no-deposit mortgage?

A 100% no-deposit mortgage is a loan for the full purchase price of the property you’re buying.

Normally, you would put down a deposit - often around 10% to 20% of the property price - and borrow the rest from a mortgage lender.

With a 100% mortgage, you need zero deposit - which overcomes the challenge of saving for a deposit.

The no-deposit mortgage from Skipton is a fixed-rate mortgage for five years, which means the interest you pay will stay the same for the first five years of your term.

What types of mortgages are there?

What Skipton Building Society said about their new no-deposit mortgage

Charlotte Harrison, Skipton's CEO of Home Financing, said: "With escalating rents and the cost-of-living squeeze further impacting people’s ability to save for a house deposit – it’s making it almost impossible for people get onto the property ladder.

"We recognise there’s a clear gap in the market for people who have a strong history of making rental payments over a period of time - so can evidence affordability of a mortgage. But there is currently no solution for them to buy a property due to lack of savings or access to family wealth.

"This is why we’re introducing our Track Record Mortgage."

Is the 100% no-deposit mortgage more expensive than other mortgage products?

The new no-deposit mortgage is good news for first-time buyers who want to get on to the property ladder but are struggling to save a deposit.

But it’s important to note that the product is slightly more expensive than the average five-year fixed rate mortgage, which currently has an interest rate of 5%.

On a £200,000 mortgage, this would cost you an extra £60 a month.

It is also worth remembering that 100% mortgages do not offer you any cushion if house prices fall. This means you face a higher risk of ending up in negative equity, when you owe more than your property is worth.

That said, if you’re frustrated about paying high rent and are not able to put together a deposit, the deal could still make sense for you.

When did 100% no-deposit mortgages stop?

Before 2008, 100% no-deposit mortgages were widely available. Some lenders even offered mortgages of up to 125% of the property’s value.

But the financial crisis of 2008 saw most 100% no-deposit mortgages stop. Mortgage lenders saw them as too risky to lend on during more difficult economic times.

They currently make up just 0.3% of all available mortgage products in the UK, according to moneyfacts.co.uk.

And they all require some form of financial backing from family or friends of the borrower. This makes the guarantor responsible for any missed mortgage payments.

It means Skipton's new no-deposit mortgage is the first of its kind to be available since 2008.

Can I afford to buy the home I rent with a 100% mortgage?

In the North East and Scotland, it works out cheaper to buy the home you rent with a 100% mortgage than to continue renting.

However, as you travel further south, the cost of paying a mortgage becomes more expensive as property values increase.

In London, where the average rent is £1,815 pcm, the monthly mortgage repayments on a £512K mortgage tested to an 8% stress rate would work out to be more than double the cost of renting, at £3,787.

That said, the repayments at a 5% mortgage rate would be considerably lower at £2,773.

A similar picture emerges for the South East, where rents are currently £1,160 pcm but monthly mortgage payments for a £300K mortgage tested to 8% would be £2,236.

The repayments at a 5% mortgage rate would be £1,638.

Use our mortgage calculator to see how different mortgage rates might impact your monthly mortgage repayments.

Mortgage calculator

Work out what your monthly mortgage payments could be with our mortgage calculator.

How much would it cost to buy the home I rent with a 100% mortgage?

The calculations below compare the cost of renting a home versus the cost of buying it across the UK.

The chart shows calculations based on a 35-year mortgage term for maximum buying power.

RegionRent pcmHome value / mortgageDepositMonthly payments at 5% mortgage rateMortgage repayments vs rent costsMonthly repayment to pass 8% stress rateHousehold income to rentHousehold income needed to meet 5% mortgageLoan to incomeHousehold income needed to pass 8% stress test
North East£598£105,926£0£574-4%£784£23,920£25,7504.11£37,250
Scotland£671£122,979£0£667-1%£910£26,840£30,7504.00£44,000
Northern Ireland£658£138,739£0£75214%£1,027£26,320£35,5003.91£50,500
Yorkshire & The Humber£696£145,305£0£78813%£1,076£27,840£37,5003.87£53,750
North West£727£146,141£0£7929%£1,082£29,080£37,7503.87£54,000
Wales£749£160,093£0£86816%£1,185£29,060£41,7503.83£60,500
East Midlands£758£173,937£0£94324%£1,288£30,320£45,7503.80£67,000
West Midlands£784£176,840£0£95922%£1,309£31,360£46,7503.78£68,500
South West£957£241,056£0£1,30737%£1,784£38,280£68,2503.53£87,750
Eastern£1,025£265,239£0£1,43840%£1,963£41,000£76,7503.46£115,500
South East£1,160£302,118£0£1,63841%£2,236£46,200£89,5003.38£136,250
London£1,815£511,604£0£2,77353%£3,787£72,600£172,2502.97£243,000
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How much can I borrow for a mortgage?

Why has Skipton Building Society brought out a 100% no-deposit mortgage?

Skipton has said that their 100% no-deposit mortgage aims to help renters trapped in renting cycles. 

“We know there isn’t one quick solution to addressing this huge societal challenge of tenants being trapped in renting cycles, with rents escalating faster than mortgage payments and the increasing costs of living,” says Charlotte Harrison from Skipton.

“But doing nothing isn’t going to solve this UK housing issue.

"As a responsible lender, we need to be sensible with our approach for bringing this product to the market and ensure tenants don’t take on more than they can realistically afford.

“We know this product will not be able to help everyone and is only part of the solution for this group of people, but as a lender, we’re taking a stand to offer innovation in this space to help turn generation rent into generation buy.”

Our take on the 100% no-deposit mortgage

Our Executive Director of Research, Richard Donnell says: "The reduction in availability of higher LTV mortgages has had a big impact on first-time buyers, where the deposit required is the biggest barrier to home ownership.

"Data from the FCA shows that just 6% of first time buyers used a mortgage at or over 90% LTV in 2021."

Understanding loan-to-value ratios

"First time buyers who can raise a 20% deposit would see their mortgage repayments become up to 20% less than the monthly cost of renting in all regions of the UK outside of the south east of England, even with mortgage rates of 5%.

"But to do this, many will need to get help from parents and family.

"The introduction of 100% loans is designed to assist those with small deposits to access home ownership.

"The proposals from Skipton require the mortgage to cost the same - or less - than the monthly rental payments. 

"This means the scheme will primarily benefit renters in more affordable housing markets in the north of England and Scotland, where house prices are lower, making a 100% mortgage more attainable. 

"The scheme is unlikely to work as well in southern England, where prices are much higher, meaning mortgage repayments would be well over the level of rents.

"The exception would be if first-time buyers were moving from a home where the rent is currently high, for example central London or central Manchester, to the outskirts of a city where the mortgage for a property is likely to be cheaper.

"High loan to value lending is set to remain a niche product but innovations such as this do help improve home ownership options for some households.

"That said, households will be wary of negative equity, should prices fall back in the areas where this product works."

What other 100% mortgages are available?

A handful of lenders already offer 100% mortgages that require some form of guarantee from a parent, family member or friend.

For example, Barclay’s Family Springboard Mortgage enables first-time buyers to borrow 100% of their property’s value if a ‘helper’ deposits savings equivalent to 10% of the purchase price in a designated savings account. 

Other deals require family members to guarantee a portion of the loan above a certain level.

Compare 100% mortgage deals at Money.co.uk

Other financial help for first-time buyers 

If a 100% no-deposit mortgage isn’t right for you, a buying scheme could be an option instead.

There are a number of schemes available to help you buy a property if you’re able to save a small deposit.

The government’s Mortgage Guarantee Scheme enables first-time buyers and home-movers to purchase a property with just a 5% deposit.

Meanwhile, First Homes enables local first-time buyers and key workers to purchase a home at a 30% discount to its market price, and Shared Ownership enables people to buy a share in a property and pay rent on the rest.

Housebuilder Fairview New Homes recently launched a Save to Buy initiative, under which first-time buyers move into their home and pay ‘rent’ at a fixed cost for between six months and two years, with the money set aside until it is enough to use as a deposit to qualify for a mortgage.

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