ANOTHER big lender has jumped on the bandwagon, launching its first no deposit mortgage in a huge win for first-time buyers.
Gable Mortgages has announced the launch of its first zero-deposit mortgage products.
This follows a similar announcement last week from April Mortgages, signalling a potential shift in the market towards helping first-time buyers overcome the deposit hurdle.
A 100% mortgage allows you to borrow the entire purchase price of the property, meaning no deposit is required.
Gable Mortgages is offering a standard five-year fixed-rate mortgage at 5.95% and a new-build version at 5.65%, both requiring no deposit.
The lender aims to support first-time buyers, key workers, and primary residents.
Compared to many other lenders, Gable offers a standard mortgage allowing borrowers to secure up to 4.49 times their annual salary.
For key workers in specific professions, this increases to 5.5 times their salary.
For example, someone earning £40,000 a year could potentially purchase a home worth £179,600 without any savings, and this amount could rise to £220,000 if they are a key worker.
To qualify for a Gable mortgage, applicants must be at least 23 years old, borrow a minimum of £125,000, and apply through a mortgage broker.
Justin Le Roux, chief executive of Gable Group, said: “This is a significant milestone for Gable Mortgages as we launch our first two products into the UK.
“We understand how hard it is for first-time buyers to get onto the property ladder, which is why we have created our zero-deposit mortgage solutions.”
Why you should be cautious with 100% deposit mortgages
THESE types of mortgages can open doors for people who wouldn't be able to get on the housing ladder otherwise.
Experts have generally seen the reintroduction of 100% mortgages as a positive thing and this deal from April Mortgages does have rigid lending criteria.
But it’s important to remember this deal won’t be for everyone and they can be seen as quite controversial home loans.
100% mortgages mean you don’t need a deposit – but it also puts buyers at higher risk of negative equity. This is when your mortgage is more than the total value of your home, which can happen if house prices fall.
If you’re in this position it can make it harder to remortgage, sell your home and get competitive rates from lenders.
Typically they also have higher interest rates, making them more expensive.
The general rule is that the smaller your deposit the higher your monthly mortgage repayments will be.
Therefore because you won’t have a deposit, your monthly repayments are likely to be more expensive compared with someone who did put down a deposit.
You will need to be sure you can keep up with the payments and account for any potential financial shocks.
100% mortgages disappeared after the financial crisis in 2008, as they were seen a contributor to the sub-prime housing bubble and subsequent collapse.
Unlike Gable’s offer, April Mortgages’ zero-deposit mortgage comes with different features and requirements.
It requires a minimum household income of £24,000 and a property value of over £75,000.
Borrowers can secure up to 4.49 times their annual income, with the option of 10 or 15-year fixed terms.
Additionally, there are no early repayment charges, but the product does not offer specific benefits for key workers.
Nicholas Mendes, mortgage technical manager at John Charcol, said: “Gable Mortgages’ new zero deposit five-year fixed deal is a crucial addition to the options available for first-time buyers, particularly those who are finding it increasingly difficult to save for a deposit while contending with record-high rents.
“Coming hot on the heels of April Mortgages’ launch last week, it shows lenders are starting to respond to the challenges faced by aspiring homeowners who are mortgage-ready in every way except for the deposit.”
The average deposit in the UK is now over £60,000, making saving a significant challenge.
In London, this figure rises to £100,000.
Before the 2008 financial crash, 100% mortgages were more common but largely vanished as lending rules became stricter.
Now, with Gable and April reintroducing these products, other lenders may soon join the market.
Nick added: “Increased competition could lead to better pricing, more innovation and a wider range of options for first-time buyers.”
Other lenders are also making it easier for first-time buyers by reducing affordability rules.
Accord, for example, offers a £5,000 deposit mortgage.
How to get the best deal on your mortgage
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
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