Renters struggling to save for a deposit have been handed a potential new route onto the housing ladder after Hanley Economic Building Society launched a nationwide 100 per cent “Rent to Own” mortgage.
The product, which was trialled last year in Stoke-on-Trent, allows first-time buyers to purchase a home without putting down a deposit, provided they can demonstrate a strong and consistent rental payment history. Loans of up to £350,000 are available, fixed at 5.79 per cent for five years.
Applicants must have a minimum household income of £25,000 and show they have paid their rent in full and on time over the previous 12 months. Borrowing is capped at up to 133 per cent of a borrower’s current rental payments, meaning affordability is closely tied to what renters already pay each month.
Mortgage brokers said the deal could help some renters finally step onto the property ladder, but warned that buying without a deposit comes with meaningful risks.
Ranald Mitchell, director at Norwich-based Charwin Mortgages, said renters had already proved their ability to manage mortgage-sized monthly payments, but were often stuck watching deposit targets drift further out of reach.
“Renters have been doing the hard bit for years, paying a mortgage-sized bill every month for someone else,” he said. “A proper zero-deposit deal like this could be the nudge that makes people finally think, ‘why not me?’”
However, Mitchell cautioned that buyers would be entering the market with no buffer. “You’re buying with no safety cushion. If prices dip, negative equity is a real risk, and because this is a specialist 100 per cent product, the rate is higher than the very cheapest deals. It’s not a free pass, but for disciplined renters, it could be a genuine route onto the ladder.”
Dariusz Karpowicz, director at Doncaster-based Albion Financial Advice, said the return of zero-deposit mortgages reflected the reality of the rental market, but urged borrowers to think carefully before committing.
“With rents swallowing income and wages barely keeping pace with bills, saving a deposit has become almost impossible without family help,” he said. “This product recognises that. But borrowers need to understand they’ll be paying interest on the full purchase price, which can make monthly payments significantly higher.”
He added that negative equity remained the biggest risk if house prices fall, and said buyers should compare the deal carefully with shared ownership schemes, where even a small deposit could reduce both cost and exposure.
Elliott Culley, director at Switch Mortgage Finance, said Hanley’s product mirrored track-record-based lending already seen elsewhere in the market, including from Skipton Building Society.
“The amount you can borrow is capped by what you currently pay in rent,” he said. “If you’re on a low rent, that will limit borrowing. These products tend to evolve over time, but right now this will help a defined group of first-time buyers without opening the floodgates.”
Pete Mugleston, managing director at onlinemortgageadvisor.co.uk, said zero-deposit mortgages were best suited to renters already paying high monthly rents, but should not be seen as a universal solution.
“The downside isn’t just negative equity, it’s also the cost of servicing a full loan at a higher rate,” he said. “For some renters, a rent-to-own mortgage will still be better than renting long-term, but it should always be compared against shared ownership. Even a small deposit can make a big difference.”
While the product will not suit everyone, advisers said its launch highlights a growing recognition within the mortgage industry that traditional deposit-led routes into home ownership no longer reflect the reality facing many UK renters.
