Why we bought our first home with a 100% mortgage - despite the risks

Until last year, Conroy, 32, and his partner Amber, 28, were unable to envision owning their own home in Manchester. They were tenants in the city centre and lacked the means to save for a deposit. They discovered the 100% Track Record mortgage from Skipton Building Society, which offers a solution for those who cannot afford a traditional deposit.

Despite the higher interest rate of 5.33% fixed for five years, Conroy and Amber decided to proceed. They purchased a four-bedroom property for £242,000 in Swinton, near Manchester. Conroy, a video editor, acknowledged that owning their home feels like a significant achievement. The Bank of England reports that the percentage of UK mortgages with deposits under 10% stands at its highest since 2008, compared to the typical 20% average first-time buyer deposit.

Mainstream lenders like Lloyds and Santander have introduced similar mortgages with deposits as low as 95% of a property's value. While these loans carry higher rates, are not available for all types of property, and carry risks, Conroy and Amber are confident in their decision. They anticipate salary growth and plan to make overpayments on their mortgage for the first five years to build equity.

However, they acknowledge the potential risk of negative equity should property values decline. Bronya and George, a civil servant and a 27-year-old man, also used a low-deposit mortgage to purchase their four-bedroom home in Rhuddlan, North Wales. They took out a £258,000 loan, representing roughly 98% of the property value, with Lloyds over a 33-year term, paying £5,000 as a deposit.

They chose this option to fund a £20,000 renovation project, believing the increased home value would outweigh the risks. Both couples recognize the importance of maintaining their affordability, keeping up with rent payments, and managing their finances responsibly.