UK banks revive 100% mortgages, loosening post-crisis lending rules
UK high street lenders are increasingly offering 95% to 100% loan-to-value mortgages, signalling a competitive shift in bank risk appetite to capture first-time buyers squeezed by stagnant affordability.
Metro Bank has launched a 100% loan-to-value mortgage for first-time buyers, marking the latest move by UK lenders to resurrect products that were largely axed after the 2008 financial crisis.
The re-emergence of zero-deposit lending signals a deliberate shift in bank risk appetite. Faced with a stagnant pool of buyers who cannot accumulate traditional deposits, lenders are becoming more creative with their product structures to maintain mortgage volumes.
Lloyds entered the space in May with a heavily promoted deal requiring just a £5,000 minimum deposit on properties valued up to £300,000, restricting its use in expensive markets like London. The five-year fix is priced at 5.89%. Santander takes a similar approach at a 98% loan-to-value ratio, but extends the maximum loan to £500,000, requiring a £10,000 deposit and offering a sharper 5.49% rate.
The building society sector is competing directly on high loan-to-value terms. Skipton targets current and recent renters with a 100% loan-to-value, five-year fix at 5.55%, allowing borrowing up to £600,000. Yorkshire Building Society offers a 99% loan-to-value alternative, capping loans at £495,000 with a 6.44% rate.
Lenders are also expanding joint borrower, sole proprietor (JBSP) loans, which allow buyers to use a relative or friend's income to secure larger loans without granting them property ownership. Metro’s new 100% deal uses this mechanism, capping loans at £675,000 but charging a premium 6.99% rate, with the family member liable for missed payments. Doug Miller of Lansdown Financial Services reports “a significant increase in demand” for these structures as rising prices stretch standard affordability.
However, this relaxed underwriting carries a distinct cost. Standard five-year fixed rates for buyers with a 5% deposit sit near 4.95%, making no-deposit options noticeably more expensive. David Hollingworth of L&C Mortgages warns that eligibility and product structures vary wildly, requiring careful navigation. Still, for a segment of the market entirely priced out, the mathematics of renting versus a high-rate mortgage are shifting. “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,” Hollingworth said.
