Widespread uptake of low-deposit mortgages by borrowers who could not afford them was seen as a major factor in the 2008 global financial crisis.
But today’s deals have much stronger affordability checks and do not pose the same risks, says David Hollingworth, associate director at brokers L&C Mortgages.
Borrowers of Skipton’s zero-deposit mortgage, for example, have to prove they have kept up with their rent for at least 12 consecutive months and credit payments for the last six months.
And Lloyds won’t issue one of its £5,000 deposit mortgages for new-build properties and shared ownership homes.
Hollingworth says lenders are recognising that some people have “good affordability but may be struggling to save for a deposit while paying a rent and dealing with cost of living pressures”.
Following a recent rule change, he adds, lenders are also offering more “flex” on how much someone can borrow as long as it’s within their means.
Nevertheless, he urges borrowers to use common sense.
“Think carefully – what do monthly payments look like? Are you aware that interest rates could go up?”
