Building society launches 100% mortgage to assist renters get on property ladder with no deposit

Renters are being offered the chance to get on the property ladder without saving a deposit, as a building society launches an 100 per cent mortgage. 

The ‘Rent to Own’ mortgage is with Stoke-on-Trent-based Hanley Economic Building Society, and is designed to help renters who could afford to pay a mortgage every month, but struggle to raise the usual 5 or 10 per cent deposit lenders require. 

Home buyers will be able to borrow up to £350,000 with an interest rate of 5.79 per cent. It’s only available as a five-year fixed rate. 

They need to earn at least £25,000 per year and the loan will also be capped at 133 per cent of their current monthly rent. 

It means someone paying the average UK rent, about £1,366 per month according to the Office for National Statistics, could potentially get a mortgage where the monthly payments are up to £1,817.

Applicants will also need to prove a 12-month track record of paying rent on time. 

The mortgage could prove a lifeline for those who earn enough to pay a mortgage, but not enough to put away large sums each month in deposit savings – as well as those who don’t have access to the Bank of Mum and Dad. 

Ranald Mitchell, director at Norwich-based Charwin Mortgages, told the news agency Newspage: ‘Renters have been doing the hard bit for years, paying a mortgage-sized bill every month, just for someone else. 

‘If you can prove you have been paying rent on time and your new mortgage payment stacks up against what you already pay, you may be able to buy without saving a chunky deposit.’

However, the interest rate is higher than mortgages with deposits, meaning the monthly payments will be more expensive. 

Someone buying a £250,000 home with Hanley’s 100 per cent mortgage at 5.79 per cent interest, on a 30-year term, would pay £1,465 per month. 

Hanley’s deal doesn’t come with any arrangement fees. 

Meanwhile, someone who could save a 5 per cent deposit of £12,500 would open up much cheaper deals. 

The best mortgage they could get today is a five-year fix with Leek Building Society, at a rate of 4.56 per cent. 

Even when the £995 arrangement fee is considered, the borrower would pay £1,276 per month – a monthly saving of £189 and an annual saving of £2,268. 

It is also cheaper than the £1,366 per month average rent.  

Over the five-year term, they’d save £10,384, paying a total of £77,533 rather than £87,917. 

Negative equity risk 

Not putting down a deposit also comes with the risk of negative equity if house prices fall, which they are in some areas of the country. 

Negative equity is when the value of a home falls below the value of the mortgage the buyer has taken out on it, meaning they owe the bank more than the home would be worth if they sold it. 

This can make a property difficult to remortgage or sell, until the value goes back up again. 

Dariusz Karpowicz, director at Doncaster-based Albion Financial Advice, 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. 

‘The real risk is negative equity when property prices fall, where you still owe the full amount but your home is worth less.’

There are several other 100 per cent mortgages on the market, notably Skipton Building Society’s Track Record mortgage. 

Like Hanley’s offering, it also requires borrowers to prove they have been consistently paying rent. Skipton offers larger loans than Hanley, up to £600,000. 

Another option for those who cannot save a large enough deposit is shared ownership, alt

This is when someone buys a percentage of a home, often starting at 25 per cent, and pays rent on the rest. They can increase their ownership over time.

The deposit is smaller as it is only paid on the proportion of the home that is being bought, not the whole value. 

For example, a 25 per cent share of a £250,000 home would cost £62,500 and a 5 per cent deposit on that would be £3,125. 

However, there are drawbacks. 

Shared ownership is largely available on newer homes, there might be restrictions on renovating your home or owning a pet as you aren’t the full owner, and legal and other fees need to be paid each time someone increases their stake. 

Pete Mugleston, managing director at Derby-based Online Mortgage Advisor, said those considering a 100 per cent mortgage should compare the costs with shared ownership. 

Mugleston said: ‘The downside of a 100 per cent mortgage isn’t just the risk of negative equity, it’s also that you’re paying interest on the full purchase price, often at a higher rate, which can make monthly payments significantly more expensive.

‘A rent-to-own style mortgage can work out better than renting in the long term, but it should always be compared against shared ownership.

‘If you can scrape together even a small deposit, shared ownership may be a cheaper and lower-risk route onto the ladder.’

First-time buyers were responsible for almost 39 per cent of transactions in 2025 according to the property website Zoopla, up from 35 per cent the year before. 

This, it said, was down to falling mortgage rates as well as a less competitive property market as home movers hesitated because of Budget property tax rumours.