Beyond Avocado Toast
Capital & Interests: The Changing Face of the UK Mortgage Scene
Harry Arnold 04 06 2024
a tasty problem
In the UK our home is our castle, and this cornerstone of British life is in many ways our unique obsession. But if home ownership is so popular, economically beneficial, and politically supported, why has it become so difficult for those who do not own a home to go out and buy one? In chapter two of our Capital & Interests series we ask what we have to do to be considered worthy of home ownership and what are the growing number of innovations in the mortgage market that have arrived on the scene to help more of us get there?
Cancelling your Netflix subscription and cutting back on avocado toast probably won’t do it, despite this song being sung at those under the age of 40 for some time now. The truth is that those unable to draw on significant support from their family, or those without abnormally high salaries, are being priced out in a market that exemplifies the economics of “the haves and have nots”.
The UK property market, worth an estimated eight-trillion pounds, holds a significant portion of the country’s wealth. The people holding that wealth have little desire to give it up, and any political party that suggests they might is swiftly told by the electorate to please think again. The old economic battleground of Baby Boomers vs Millennials is beginning to give way to an even more nuanced confrontation: Millennials with an inheritance, and Millennials without.
So, what’s being done to level the playing field? It’s probably going to take an extended period of fundamental reform to help the UK escape stagnation and enter an age of equality and prosperity, where our wages increase above the rate of house price inflation, and peace and love is extended to all. In the meantime, innovation in the mortgage market will have to do.
Luckily, help is at hand, thanks to a growing family of products designed to help Generation My-Landlord-Is-Upping-My-Rent. From Ultra Long Mortgage Terms to trendy Scandi style loans, a new generation of mortgage products is hitting the market.
What is new on the shelves?
The Track Record Mortgage hit the shops from Skipton Building Society in May 2023. It’s a simple option, allowing for a 100% mortgage with no deposit, as long as your mortgage payment is no higher than the rent you currently pay. When making a credit decision, this option takes into account your performance as a renter, which is fairly unique amongst retail lenders. You’ll still need to adhere to Skipton’s strict lending criteria, have a picture perfect credit rating and if you’re living at Mum and Dad’s, this one isn’t for you.
The 5k Deposit Mortgage is the most recent offering from Accord Mortgages, only launched a couple of months ago. This option allows for someone to borrow with a minimum £5k, or 1% deposit, on a maximum purchase price of £500,000. No flats allowed, and an immaculate credit score is required. This option is great for anyone who’s saved up some money by moving back in with Mum and Dad, but also have a quality job to lean on, driving affordability for the mortgage itself.
The thing that sets these two apart from the more traditional Joint Borrower Sole Proprietor offered by several larger banks, is that they are focused on the worthiness of the individual, rather than relying on parents participating in the mortgage, or putting their money on deposit with the bank - as we see with the Family Springboard Loan offered by Barclays. An honourable mention also to the Dutch, with newcomers April Mortgages and Perenna bringing Long Term Fixed Rate options that may well be a superb option for those who want to go big on the borrowing with no exposure to the rate market.
Although it’s exciting to see these products coming out, offering innovative solutions - it’s important to note that they are provided by small institutions. They’re not currently being offered by the big banks with their big boy balance sheets - and until they start to get on board, the dial is unlikely to shift dramatically.
how we can help
It’s a long road to a more accessible housing market, but these innovative products offer stepping stones for aspiring homeowners. Perhaps, with continued innovation and a focus on individual merit, the dream of homeownership could become a reality for a wider segment of the population.
Navigating these choppy waters is challenging, and as always advice is critical when you’re seeking any mortgage, especially if you’re diving in for the first time. Reach out for a conversation with a member of our team today.