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Potential 99 per cent mortgage scheme could help some but ‘devil is in the detail’, industry says

  • 22/01/2024
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Potential 99 per cent mortgage scheme could help some but ‘devil is in the detail’, industry says
The possible introduction of a 99 per cent loan to value (LTV) scheme could help some first-time buyers get on the property ladder, but specific issues around negative equity and rising house prices would need to be introduced.

Earlier today, reports suggested that the government could be considering a 99 per cent mortgage to help first-time buyers.

Jeremy Duncombe, managing director of Accord Mortgages, said that consumer research that it had published in its Home Truths report raising a deposit was a key challenge faced by first-time buyers and inspired a recommendation that a “new form of government assistance was needed”,

He welcomed the recognition by the government of the “barriers preventing many people from getting a footing on the housing ladder”.

Duncombe continued: “As a lender committed to this group of borrowers who deserve a chance to own their own homes and contribute significantly to the vitality of the market overall, we welcome innovation and support the need to think differently about how we can collectively help more people into home ownership during these challenging economic times.

“Any new government-backed mortgage scheme would need to be carefully assessed to ensure it offered long-term benefits to both the housing market and borrowers. Historically, such schemes have proven popular, but can have unintended consequences such as increasing demand and therefore house prices.”

He noted that a 99 per cent LTV mortgages like the one suggested would require lenders to “take a much more ‘hands on’ approach to underwriting, to ensure that responsible lending commensurate with borrowers’ ability to repay the mortgage now and in the future, given the increased risks low-deposit mortgages pose”.

“At Yorkshire Building Society, we are well placed to do this given our highly capable mortgage advice and underwriting teams, who have mandates to make decisions based on individual circumstances. We will keep a watchful eye on how this idea unfolds,” Duncombe added.


High LTV scheme is ‘utmost desperation’ from politicians

David Hannah, group chairman of Cornerstone Tax, said that reports of a 99 per cent LTV mortgage from the government “showcases the utmost desperation from politicians looking for an easy-fix to one of the most prescient issues for young voters, affordability”.

He continued: “In my view, encouraging first-time buyers to take on increasingly unaffordable debts is not a viable long-term solution to Britain’s housing woes.

“The move amounts to piecemeal political tinkering whereby the root causes of the current crisis remain unaddressed, the nation’s dwindling housing stock, record-high interest rates and a stamp duty regime that refuses to shift towards current market trends must be addressed by policymakers if the government wants to get Britain buying again in 2024.”

Hannah said it was “essential” that the government must also “prioritise unfreezing the private rental sector” as mortgage rates have increased and landlords face a much higher tax burden. He noted that this had led some to leave the property market, which in turn had led to rents rising at their fastest level since 2006 due to rental supply shortage.

Gary Bush, financial adviser at, added that the “latest government meddling in the UK property and mortgage market isn’t well received by financial advisers who have grown up in the industry.

“Lenders operating already in the higher loan amount arena are doing a good job to assist first-time-buyers and there is more to follow right up to 100 per cent soon it seems.

“99 per cent LTV mortgages are a great way to assist first-time buyers but without the very much needed drastic increase in “affordable homes”, how is this going to make affordability not a concern, it’s a little like the Help to Buy scheme and attempt to paper over the cracks,” he explained.

Bush continued that the “devil is in the detail of this latest scheme” and it would have to be properly scrutinised before passing judgment.


High LTV deal could help FTBs and have ‘huge demand’

Lee Gathercole, co-founder at Rebus Financial Services, said that one per cent deposit mortgages could be “ideal for first-time buyers and there would be huge demand for this type of product”.

“I would assume that this would come with “higher” interest rates and require a clean credit profile as I don’t think the banks will be able to handle the demand for this. Some innovation would be needed,” he noted.

Gathercole continued that the design of the product would have to be “careful”, so it didn’t push up house prices as it was a “vicious cycle” where first-time buyers could struggle to raise the mortgage they need.

Ross Lacey, director and chartered financial planner at Fairview Financial Management, agreed and added that this could “work really well for those who earn a high enough income to support the borrowing amount needed, but because they are currently renting, find it hard to save a sufficient deposit”.

“Lots of potential borrowers will fall into this category where their current mortgage payments will be the same or more than the mortgage they’ll take out,” he added.

Lacey said that it would be important for clients to “understand that there’s likely to be less competition or choice at this high a LTV, so rates will be higher and at remortgage time, they may find it hard to move to another lender”.

“For lenders that do offer these products, it would give prospective borrowers more confidence to know that there will be competitive “existing customer” deals they can move onto at the end of the fixed rate period or alternative protections in place to avoid another “mortgage prisoner” situation,” he added.

James Bull, mortgage broker at JB Mortgages, continued that if the government backed a 99 per cent LTV mortgage, it would be a “great success”.

“Due to the rising cost of living and ever higher rental costs, many people are struggling to save for a deposit so buying a home is out of reach for them. But although they cannot save for a deposit, they are managing to pay their bills just fine and on time. These people are perfect for a scheme such as this and I believe it would be very popular,” he noted.

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