Metro Bank has become the latest high street lender to launch a mortgage that allows eligible first-time buyers to borrow up to 100% of a property's value, joining a growing trend of low- and no-deposit home loans. These products, once common before the 2008 financial crisis, are making a comeback as banks and building societies relax affordability rules and introduce creative offerings.
New Mortgage Deals from Major Lenders
In May, Lloyds launched a heavily promoted mortgage requiring a minimum deposit of only £5,000, equivalent to a maximum loan-to-value of just over 98%. This five-year fixed-rate deal carries an interest rate of 5.89% and is available on homes worth up to £300,000, making it less accessible for buyers in expensive areas like London. The product is also offered through Halifax and mortgage brokers.
Santander has a similar deal allowing borrowing up to 98% of a property's value, with a five-year fixed rate of 5.49%, a maximum loan of £500,000, and a minimum deposit of £10,000. Meanwhile, the Skipton Building Society offers a 100% mortgage aimed at current and recent renters, with borrowing up to £600,000 and a five-year fixed rate starting at 5.55%. The Yorkshire Building Society provides a 99% loan with a maximum of £495,000 and a rate of 6.44%.
Joint Borrower, Sole Proprietor (JBSP) Mortgages
Another growing option is the joint borrower, sole proprietor (JBSP) mortgage, which allows relatives or friends to join the mortgage application without becoming legal owners of the property. This setup factors in all incomes, boosting borrowing power. According to David Hollingworth at L&C Mortgages, many lenders offer JBSP as an option, but eligibility varies. Doug Miller at Lansdown Financial Services notes a "significant increase in demand" for JBSP mortgages as property prices rise and affordability tightens.
Metro Bank's new JBSP deal allows borrowing over 95% and up to 100% of a property's value, provided an immediate family member acts as a joint borrower in case of missed payments or financial changes. It is a five-year fixed deal with a maximum loan of £675,000 and a high interest rate of 6.99%.
Trade-Offs and Considerations
Low- or no-deposit mortgages typically come with higher interest rates. For comparison, borrowers with a 5% deposit can secure standard two- and five-year fixed rates starting at about 5.05% and 4.95%, respectively. Those with a 10% deposit or more enjoy even lower rates and a wider choice of deals.
David Hollingworth advises first-time buyers to weigh their options carefully, possibly consulting a broker. He says, "For those who feel as if they are treading water paying rent, being able to put down as little as £5,000 [or in some cases nothing at all] could make home ownership a much more achievable option for them." However, he adds that some may prefer to continue saving for a larger deposit to secure a better rate.
All product details and rates are correct at the time of writing.
