If you hate renting but have no deposit saved up, a 100% mortgage may sound tempting. Finance writer Rachel Pearce urges female renters to think carefully before looking for a ‘magic mortgage button’.
When I saw that Skipton Building Society had launched a new 100% mortgage for renters, my first thought was, ‘Did we learn nothing from the 2008 credit crunch?’ It took years to recover from that catastrophe, one of the catalysts for which was the willingness – perhaps even eagerness – of mortgage lenders to extend credit to people who couldn’t afford it. Families lost their homes, the global economy fell apart…and, hey presto, here we are again, about to make the same old mistakes.
many female renters are struggling to put food on the table, let alone save up for a deposit
Most of us in the UK are locked in a financial nightmare at the moment. House prices are sky high, mortgage rates have almost tripled and the cost of living might be amusing if it wasn’t so darn depressing. To make matters worse, wages have been largely static for around 20 years.
If you’re a renter, things may seem particularly bleak right now. Rental prices have increased by around 11% in the last year alone – and they weren’t exactly cheap before that. Added to that, the number of no-fault eviction notices has risen by almost 200%.
An increase in female renters resorting to ‘survival sex’ is one worrying trend
Women have been particularly hard hit by the cost-of-living crisis – especially single mums and those on low incomes. An increase in female renters resorting to ‘survival sex’ is one worrying trend. Some are offered free or discounted housing in exchange for sex, while others are turning to escort work or online pornography creation just to make ends meet. It may not have come to that for you, but the fact is, many female renters are struggling to put food on the table, let alone save up for a deposit.
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I know this feeling well. When my then-boyfriend-now-husband and I first sat down to look at our (non-existent) finances, we worked out that we wouldn’t be able to afford a tiny one-bedroom flat in our chosen location for at least five years – five years of really hard work and super scrimping. And that was back in the good old days when we didn’t have to choose between eating dinner and putting the heating on.
It’s worth remembering, however, that if house prices fall – and that seems fairly inevitable right now – you could end up in negative equity
If someone had offered us a 100% mortgage back then we’d have bitten their hand off, regardless of the fact that we were both self-employed and had zero self-discipline when it came to spending. It would have been like a miraculous fast-forward button that helped us escape the rental prison we’d been locked in for longer than either of us had ever imagined. Sadly, there was no magic button for us.
But could this be one for you?
If you’ve been looking for a way out of renting, this type of mortgage (and it’s likely that other lenders will get on the bandwagon) could be the very lifeline you need. Perhaps you have a steady income but just haven’t been able to save up enough for a deposit. It’s worth remembering, however, that if house prices fall – and that seems fairly inevitable right now – you could end up in negative equity. This means that your new home would be worth less than your mortgage, which would make you as much of a mortgage prisoner as you currently are a rental prisoner. Given that the Bank of England has just put interest rates up once again (the 12th time in a row!), the pressure is on for many borrowers.
I would recommend contacting a reputable mortgage broker to discuss your options
One important measure Skipton has put in place to protect prospective homeowners (and the global economy) is that it will only lend up to the amount you are currently paying in rent. So if you pay £1,000 per month for your rental, the maximum monthly mortgage payment it will allow you to make is £1,000. There are many other hoops you’ll need to jump through before it’ll sign on the dotted line, and it’s worth noting that the Skipton deal is a five-year fix – and is being offered at a slightly higher rate than the average five-year deal – but at least the option is out there.
My advice would be to pray and ask God to guide you in your finances. If, after that, you still feel drawn to this type of deal, I would recommend contacting a reputable mortgage broker to discuss your options. He or she will look at all the possibilities and help you make a sensible decision. It might be that a 100% mortgage is the right option for you, but I would urge you to think very carefully before pressing a ‘magic’ button that sends you soaring out of the frying pan and right into the fire.
If you are concerned about the rising cost of living and would like someone to pray with you, call Premier Lifeline on 0300 111 0101. It’s a national Christian confidential helpline open 9am to 5pm Monday to Friday (excluding public holidays).