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In a move echoing the pre-financial crisis era, a second lender in less than a week has launched a 100% mortgage aimed at helping first-time buyers step onto the property ladder without the need for a deposit. Gable Mortgages, a relatively new lender founded in 2024, is now offering home loans that cover the entire value of a property. This follows a similar announcement last week from April Mortgages.
The emergence of these no-deposit mortgages marks a significant shift in the lending landscape. In recent years, such products have been exceedingly rare, with most lenders typically requiring borrowers to provide at least a 5% deposit. Even lower deposit options often necessitate a parental guarantor.
Gable Mortgages explicitly targets what they term "generation rent" – individuals who can consistently afford rental payments, which may even exceed potential mortgage costs, but struggle to accumulate the substantial savings required for a deposit. Justin Le Roux, chief executive of Gable Group, emphasized this point, stating, "There is a whole generation of renters out there who are struggling to save to buy and pay their rent at the same time. This has made it significantly harder for first-time buyers, especially key workers, to get onto the property ladder."
He added, "We believe in changing this by offering a solution where the buyer can get a quick decision based on affordability and not – like so many other products on the market – based on what they have managed to save up or borrow from the bank of mum and dad."
Gable Mortgages offers two distinct products: a standard mortgage and a specialized option for new-build properties purchased from their partner developers. Their standard mortgage allows borrowers to borrow up to 4.49 times their annual salary, a figure that increases to 5.5 times for key workers in designated professions. This means a first-time buyer earning £40,000 could potentially purchase a home valued at £179,600 without any savings. For key workers, this borrowing capacity could extend to £220,000.
To be eligible for a Gable mortgage, applicants must be at least 23 years old and seeking to borrow a minimum of £125,000. Crucially, all applications must be processed through a mortgage broker. Both mortgage options are currently offered on a five-year fixed-rate basis, differing from April Mortgages' longer 10 or 15-year fixed terms.
The interest rates on these zero-deposit mortgages are notably higher than those available to buyers with a deposit. Gable's standard mortgage carries a rate of 5.95%, while the new-build mortgage is offered at 5.65%. In comparison, Monmouthshire Building Society offers a five-year fixed rate at 4.75% with a £1,409 fee, and Nationwide has a similar product at 4.79% with a £1,167 fee, both requiring a 5% deposit.
The financial implications of these higher rates are significant. For instance, borrowing £200,000 over 30 years would result in monthly payments of £1,043 with the Monmouthshire 5% deposit mortgage, compared to £1,193 with Gable's standard 0% deposit mortgage.
Despite the higher costs, industry experts hold differing views on the re-emergence of 100% mortgages. Chris Sykes, technical director at mortgage broker Private Finance, acknowledged the potential benefits, stating, "For some, these products could be a real game-changer, and I think it is good to see innovation in the mortgage market, if they are regulated in the right way." He added, "We speak to many people paying huge amounts of rent that would see a considerable reduction in costs when comparing this to a mortgage - so for some I think it is fantastic that more lenders are offering them an opportunity to become homeowners."
However, concerns have also been raised about the potential risks associated with zero-deposit lending. Kundan Bhaduri of The Kushman Group drew a stark comparison to the pre-2007 era, stating, "Gable and April Mortgages' zero-deposit products bear striking resemblance to Northern Rock's pre-2007 folly that culminated in Britain's first bank run since 1866 and left millions in negative equity." He further warned, "The UK property market already suffers from endemic structural issues. Injecting more unqualified buyers will further inflate prices whilst creating a new cohort of vulnerable homeowners."
The launch of these 100% mortgages will undoubtedly be closely watched by both prospective first-time buyers and industry observers, as they navigate the potential opportunities and risks associated with borrowing the full value of a property.
