A major new mortgage product could revolutionise the journey for first-time buyers, allowing renters to purchase a home without saving for a deposit.
What is the 'Rent to Own' Mortgage?
Hanley Economic Building Society has rolled out its 100% 'Rent to Own' mortgage across the UK, following a successful pilot in Stoke-on-Trent last year. The deal enables eligible applicants to borrow up to £350,000 without putting down any deposit. The fixed interest rate is set at 5.79% for an initial five-year term.
To qualify, potential borrowers must meet specific criteria. They need a minimum annual household income of £25,000 and must provide evidence that they have paid their rent in full and on time for the previous 12 months. Crucially, the new mortgage payment can be up to 133% of their current rental payment, making the transition from renting to owning more feasible for many.
Expert Analysis: Opportunity Versus Risk
Property and mortgage experts have welcomed the initiative as a potential game-changer but have also issued clear warnings about the inherent risks.
Ranald Mitchell, Director at Charwin Mortgages in Norwich, commented: "For years, renters have been paying a mortgage-sized bill every month, just for someone else's asset. A proper zero deposit deal like this could be the nudge that makes thousands finally ask, 'why not me?'"
He explained the practical benefit: "If you can prove a consistent rental payment record and your new mortgage cost is comparable, you may bypass the need for a large cash savings pot."
However, Mitchell emphasised the flip side: "You are buying with no safety cushion. If house prices fall, you could quickly find yourself in negative equity. Furthermore, as a specialist 100% product, the interest rate is higher than the very cheapest deals available to those with deposits, and your recent financial conduct must be impeccable."
A 'Genuine Route' for Disciplined Renters
Despite the cautions, the consensus is that this mortgage offers a vital alternative in a challenging market. For disciplined renters who are reliable payers but struggle to save a substantial deposit while covering high rental costs, the 'Rent to Own' scheme provides a tangible path to homeownership.
Mitchell concluded: "It's not a free pass, but for those watching their deposit target move further away, it could be a genuine route onto the ladder." The launch signals a significant shift in lending criteria, directly linking rental payment history to mortgage affordability for the first time on a national scale.
