Renters can now buy a home without putting down any deposit, offering what some in the industry describe as a genuine route into homeownership
However, others in the industry warn that buyers using the scheme would have no financial safety buffer if house prices fall or costs rise.
Hanley Economic Building Society has launched a 100 per cent “Rent to Own” mortgage nationwide, following a pilot scheme in Stoke-on-Trent last year.
Property professionals have welcomed the move as a potential lifeline for first-time buyers who struggle to save for a deposit, while stressing that the arrangement carries clear risks.
Ranald Mitchell, director at Norwich-based Charwin Mortgages, said the product could be “a genuine route onto the ladder” for renters who are disciplined with their finances.
The zero-deposit loan offers borrowers up to £350,000 at an interest rate of 5.79 per cent fixed for five years.
Those applying must demonstrate a minimum annual household income of £25,000 and provide evidence of having met their rental obligations in full throughout the preceding 12 months.
The maximum borrowing amount is linked to existing rent payments, with loans permitted up to 133 per cent of what applicants currently pay their landlord each month.
This structure means those on particularly favourable rental agreements may find their borrowing capacity restricted, as the mortgage amount directly correlates with their current housing costs.
Renters can now buy a home without a deposit under new deal
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Mr Mitchell explained that tenants have effectively been servicing mortgage-sized payments for years, only for the benefit of their landlords rather than themselves.
He said: “A proper zero deposit deal like Hanley’s Rent to Own could be the nudge that makes thousands of renters finally think, why not me?”
The mortgage broker noted the process is straightforward in principle: those who can demonstrate consistent rent payments and whose proposed mortgage instalments align with their current outgoings may qualify to purchase without accumulating a substantial deposit.
Mr Mitchell added that for renters watching their savings targets constantly slip further away, this product represents a genuine opportunity to finally own their home.
Hanley Economic Building Society has launched a 100% “Rent to Own” mortgage deal
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However, he cautioned that purchasers would be entering the market without any protective cushion, meaning a decline in property values could leave them owing more than their home is worth.
Dariusz Karpowicz, Director at Doncaster-based Albion Financial Advice, acknowledged the product addresses a genuine need but urged potential applicants to consider their decision carefully.
He said: “Before you get excited, understand what you’re signing up for. You’ll pay interest on the full purchase price at a higher rate, making monthly payments steeper than if you had a deposit.”
Mr Karpowicz warned the primary danger lies in negative equity should house prices fall, leaving borrowers trapped with debt exceeding their property’s value.
The zero-deposit loan offers borrowers up to £350,000 at an interest rate of 5.79 per cent fixed for five years
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He advised comparing the mortgage against Shared Ownership schemes, where even a modest deposit might secure more favourable rates and reduced risk.
Pete Mugleston, Managing Director at Derby-based onlinemortgageadvisor.co.uk, suggested Shared Ownership could prove the better choice for many prospective buyers.
He said: “If you can scrape together even a small deposit, Shared Ownership may be a cheaper and lower-risk route onto the ladder.”
Elliott Culley, Director at Hayling Island-based Switch Mortgage Finance, noted similarities with Skipton’s track record product, which has been available for several years.
He predicted Hanley’s offering would likely evolve to suit more borrowers over time.