“It’s not clear yet just how squeaky clean your credit score needs to be to get one of these mortgages, but it’s likely that Skipton will be super-selective.”
Other brokers were more critical.
Graham Cox, founder of SelfEmployedMortgageHub.com, said he was “amazed” that the Prudential Regulation Authority gave Skipton the go-ahead for the product.
“I understand the logic of trying to help those who are rent-trapped, and unable to save for a deposit, but to me it's addressing the symptom rather than the cause, which is that house prices are too high.”
The grave danger is borrowers will overextend themselves, he said.
“The slightest fall in house prices, and I believe they'll fall significantly over the next 12-18 months will leave homeowners in negative equity, with the property worth less than the mortgage balance.”
Steven Morris, advising director at Advantage Financial Solutions LTD said there might be “some sort of catch” to provide extra security for Skipton given the current market uncertainty.
“This could be a linked 'forced savings plan', which is assigned to Skipton, until the loan-to-value drops below a certain level, or using a landlord discount to get the LTV below 95 per cent from the get-go, without any physical deposit being required.
“For now, would-be borrowers and brokers are keeping their eyes very much peeled.”
sally.hickey@ft.com
