Metro Bank has introduced a new zero-deposit mortgage, allowing first-time buyers to purchase a home with no upfront deposit. The loan-to-value ratio ranges from 95% to 100%, and the property must be worth up to £675,000. Given the average UK home price of £376,191 and London average of £670,067, the cap covers most first-time buyer properties.
How the Zero Deposit Mortgage Works
This is a Joint Borrower Sole Proprietor (JBSP) mortgage, meaning between one and four immediate family members must apply alongside the borrower. Their income is used in the affordability assessment, typically at 4.5 times the combined annual earnings, potentially allowing a higher borrowing amount. The borrower owns the home, but joint borrowers are responsible for repayments if the borrower defaults, affecting their credit history.
Metro Bank states that lending is subject to "enhanced eligibility requirements," and borrowers will receive specialist mortgage advice before applying. There are no product or valuation fees. The mortgage is offered at a maximum term of 35 years with a five-year fixed rate of 6.99%. It is not available for properties above commercial premises or new builds.
Other Zero Deposit Options
Skipton Building Society offers similar products with a higher borrowing multiplier of 5.5 times income. Its Delayed Start mortgages allow payments to begin later, though interest accrues from day one. Barclays scrapped its deposit requirement for Right to Buy (RTB) mortgages last year, enabling eligible council and housing association tenants to buy without a deposit. Most other lenders require at least £5,000 to £10,000 for low-deposit options.
Risks of Zero Deposit Mortgages
Money Supermarket warns that zero deposit mortgages often come with higher interest rates and increase the risk of negative equity if property values fall. Marc von Grundherr, director of Benham and Reeves, told Metro: "For the right borrower, 100% mortgages can be a sensible option, particularly where monthly repayments are comfortably affordable, and there's a clear intention to remain in the property for the medium to long term. That said, they do come with a greater degree of financial risk."
He added: "Starting with no equity means homeowners are more exposed should house prices fall, while borrowing the full purchase price generally results in higher monthly repayments and less flexibility when it comes to remortgaging during the early years of homeownership." Von Grundherr emphasized that the key question is long-term affordability and ensuring the mortgage remains manageable if interest rates or personal circumstances change.
"While they can be an excellent stepping stone for aspiring homeowners, some buyers may ultimately benefit from waiting until they've built even a modest deposit," he concluded. "This gives them access to a wider choice of mortgage products, more competitive borrowing costs, and a valuable equity cushion from day one."
