I’ve read a lot of commentary over the past few weeks on the return of 100% mortgages – most of it filled with doom-laden warnings, referencing the pre-2007/08 financial crisis market, and dripping with the kind of tone that suggests lenders and borrowers are sleepwalking into disaster once again.
Let’s be clear. It is absolutely right to scrutinise product developments in our market. But what is not right – and frankly, what is lazy journalism – is to draw a straight line from Northern Rock’s infamous 125% mortgage and the reckless lending practices of two decades ago to the cautious, highly-targeted 100% products we saw back then and, even more so, today.
For a start, 100% LTV mortgages did not cause the Credit Crunch; far from it. Prior to 2008, there was lots of responsible 100% LTV lending taking place, via some of our biggest lenders. Indeed, there is a very strong argument to suggest the clients who secured 100% LTV mortgages back then were of a higher calibre than those who were putting down 10/20% and having their applications waved through with little (or no) assessment.
Borrowers who wanted a 100% LTV back then needed a much higher credit score, and the subsequent arrears rates on these borrowers/products were almost nothing, showing that lenders were doing their jobs well in this space.
Brining that argument up to date, now – on top of this – we have much more stringent regulation, affordability checks, consumer understanding, and market structure. So, firstly, to suggest these products were the cause of the crash is nonsense, and to now suggest these are somehow leading us down a slippery slope is also equally nonsense and also damaging to potential borrowers, to the advisers working hard to help them, and to lenders trying to offer sensible solutions in a very challenging environment.
Let’s start with the basics. Skipton Building Society’s 100% mortgage, launched last year, is only available to renters with a flawless credit record, who can prove they’ve been making consistent monthly rent payments at, or above, the proposed mortgage repayment. There are affordability assessments, a five-year fixed rate to give stability, and a much stronger regulatory backdrop compared to anything we had pre-Credit Crunch.
Where is the recklessness here? Where is the handing out of money to anyone with a pulse? It does not exist and therefore to even suggest that this product starts us on a ‘back to the future’ style journey to the lending practices of two decades ago is patently untrue.
The mainstream media rarely seems to engage with the practical reality that many of today’s would-be homeowners face. They’re often paying more in rent than they would on a mortgage. They’re budgeting, managing their finances, building stability – but often still locked out of ownership because they are unable to save enough for even a 5/10% deposit.
Saving for this in many parts of the UK can be a monumental task. The cost of living crisis, high rents, stagnant wages, and a lack of financial support from family mean that many otherwise sound borrowers are permanently stuck renting. And that’s not a better or safer option.
We have a generation of renters who are entirely mortgage-fit in terms of monthly payments, but who are excluded from homeownership purely because of upfront costs. If a product can safely bridge that gap – and 100% deals can clearly do just that – why are we not welcoming it with open arms?
Advisers, and the entire mortgage industry, need to start pushing back on this lazy narrative that any high LTV lending is inherently dangerous. It’s not.
What’s dangerous is offering high LTVs to people who can’t afford it. That’s not what’s happening here. These borrowers are being rigorously assessed. And let’s be honest – every mortgage carries risk. That’s why advice matters. That’s why we have processes, regulation, and a robust advisory community in place.
I’m not arguing for a mass return to 100% mortgages across the board. But I am arguing for a more intelligent debate. One that recognises that risk can be managed, that borrowers can be responsible, and that some products – even ones that headline with ‘100%’ – can be exactly what’s needed.
As an industry, we have to be better at communicating the benefits of innovation, especially when it comes to helping first-time buyers. That means challenging poor media takes, providing real-world case studies, and being loud about the value of advice in helping borrowers choose what’s right for them and the protections it clearly affords them..
Let’s not allow outdated, and frankly wrong, perceptions to define the future. Back then, and even more so today, 100% mortgages are viable and necessary, and lenders have been active in this space for a very long time. They are certainly not a step backwards – they are, for some, the only viable step forward.
