A major new mortgage product has been launched, offering a potential lifeline to renters struggling to save for a house deposit. The Hanley Economic Building Society has unveiled its 'Rent to Own' mortgage, designed specifically to help first-time buyers get onto the property ladder without needing a traditional cash deposit.
How the New Rent to Own Mortgage Works
The scheme allows eligible applicants to borrow up to £350,000 to purchase a home. To qualify, potential borrowers must have a minimum annual income of £25,000. The key criterion is that the new monthly mortgage repayment cannot exceed 133% of their current monthly rent.
With the average UK rent now at £1,366 per month, this calculation could allow a renter to take on a mortgage with monthly payments of around £1,817. However, all applicants will still be subject to the lender's standard credit checks and affordability assessments.
The product comes with a five-year fixed interest rate of 5.79%. Industry experts note this rate is higher than some deals available to buyers who can provide a deposit. For comparison, Leek Building Society offers a five-year rate of 4.56% for those with a 5% deposit, and Co-operative Bank has a two-year fix at 4.5% for the same deposit level.
Understanding the Risks and Eligibility
Mortgage advisers are urging caution, highlighting the inherent risks of any 100 percent mortgage. The primary danger is negative equity, where the outstanding loan becomes greater than the property's value if house prices fall.
"In practice it's simple: 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," explained Ranald Mitchell, Director at Charwin Mortgages in Norwich.
"The flip side is you are buying with no safety cushion, so if house prices dip you can end up in negative equity, and because it's a specialist 100 per cent product the rate can be higher than the very cheapest deals." He added that applicants will need a flawless recent payment history.
This new product follows the launch of Skipton Building Society's Track Record Mortgage in 2023, another deposit-free option for tenants with a proven record of timely rent payments. A key difference with the Hanley Economic's scheme is that it does not require a guarantor, unlike many other zero-deposit products on the market which typically need a homeowner to back the application.
Is This a Viable Route onto the Ladder?
The Rent to Own mortgage is not a universal solution, but it presents a concrete option for a specific group of people. It is aimed at disciplined, long-term renters who are reliably meeting high rental costs but watching their deposit savings goal recede due to rising house prices and living costs.
"It's not a free pass," cautioned Mitchell, "but for disciplined renters who are stuck watching deposit targets run away from them, it could be a genuine route onto the ladder."
Prospective buyers must carefully weigh the benefit of immediate homeownership against the higher interest costs and the significant financial risk of having no equity buffer at the start of their mortgage term.
