Zero-deposit mortgages have returned to the UK housing market, offering a potential lifeline to first-time buyers struggling to save for traditional down payments while dealing with soaring rental costs.
At a Glance
- Gable Mortgages has launched zero-deposit mortgage products, following a similar move by April Mortgages
- Borrowers can secure up to 4.49 times their annual salary, with key workers eligible for up to 5.5 times
- The 100% mortgages come with five-year fixed rates starting at 5.65% for new-build properties
- Applicants must be at least 23 years old and borrow a minimum of £125,000
- These products carry higher risks including potential negative equity if house prices fall
Return of 100% Mortgages
Gable Mortgages has introduced its first zero-deposit mortgage products to the UK market, creating new pathways to homeownership for first-time buyers and essential workers. These 100% mortgages allow qualified borrowers to finance the entire purchase price of a property without providing any upfront deposit.
The company now offers a standard five-year fixed-rate mortgage at 5.95% and a specialized new-build version with a slightly lower rate of 5.65%. This development follows similar moves by April Mortgages, signaling a potential shift in the mortgage lending landscape that hasn’t been seen since before the 2008 financial crisis.
Zero-deposit mortgages virtually disappeared after the housing market collapse over a decade ago, when they were widely criticized for contributing to risky lending practices. Their reemergence comes as potential homebuyers face unprecedented challenges in saving for deposits while managing record-high rental costs.
The average deposit required to purchase a home in the UK now exceeds £60,000, with London buyers needing to save approximately £100,000 – an insurmountable hurdle for many working families despite having stable incomes sufficient to cover monthly mortgage payments.
Special Terms for Key Workers
Under Gable’s new program, standard applicants can borrow up to 4.49 times their annual salary, but the company has created enhanced terms for those in essential public service roles. Key workers, including healthcare professionals, teachers, police officers, and firefighters, can access more generous lending criteria with borrowing potential of up to 5.5 times their annual salary. This recognizes the vital contributions these workers make to society while acknowledging the challenges they face in affording homes in the communities they serve, particularly in high-cost areas.
“This is a significant milestone for Gable Mortgages as we launch our first two products into the UK. We understand how hard it is for first-time buyers to get onto the property ladder, which is why we have created our zero-deposit mortgage solutions.”, said Justin Le Roux.
Applicants for these new mortgage products must be at least 23 years old and borrow a minimum of £125,000. All applications must be submitted through a mortgage broker rather than directly with the lender. This requirement ensures borrowers receive proper guidance about the potential risks and benefits of 100% financing. The products are primarily targeted at first-time buyers and primary homeowners who struggle with deposit requirements despite having sufficient income to support mortgage payments.
Understanding the Risks
Financial experts caution that zero-deposit mortgages come with significant considerations that potential borrowers should carefully evaluate. The most prominent risk is negative equity – a situation where the mortgage balance exceeds the property’s value. This becomes particularly problematic if housing prices decline, as owners may find themselves unable to sell without bringing additional funds to closing. The interest rates on these products are also typically higher than conventional mortgages that require deposits, resulting in greater overall costs across the life of the loan.
“Gable Mortgages’ new zero deposit five-year fixed deal is a crucial addition to the options available for first-time buyers, particularly those who are finding it increasingly difficult to save for a deposit while contending with record-high rents. Coming hot on the heels of April Mortgages’ launch last week, it shows lenders are starting to respond to the challenges faced by aspiring homeowners who are mortgage-ready in every way except for the deposit.”, said Nicholas Mendes.
Other lenders appear to be following this trend of increasing accessibility to mortgages. Accord has recently relaxed some of its affordability rules for first-time buyers, while April Mortgages requires a minimum household income of just £24,000 and will consider properties valued above £75,000. Prospective borrowers are advised to consult with mortgage brokers who can provide personalized guidance based on individual financial circumstances, credit scores, and long-term homeownership goals before committing to a zero-deposit mortgage product.
