As first-time buyers and homeowners grapple with affordability challenges caused by house price inflation and higher mortgage rates, some mortgage lenders have been inspired to think differently and design innovative products for borrowers.
Mortgage Solutions has spoken to the top mortgage innovators to find out how their deals work, who is eligible and whether we can expect to see more mortgage innovation from them in 2025.
Skipton Building Society
Skipton Building Society launched its Track Record mortgage in May 2023 to offer borrowers 100% loan to value (LTV).
The society uses the average rent the customer is paying to determine the maximum loan. It says it can be assured that, despite there being no requirement for a deposit, the mortgage is affordable based on their track record of paying rent and household bills.
Since the deal launched, the society has relaxed its lending policy to allow the product on new-build flats as well as houses. It is also no longer available exclusively to first-time buyers.
To qualify, borrowers must not have owned a home in the past three years.
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Jen Lloyd, head of mortgage products and proposition, said: “The decision to shift from initially only first-time buyers to including those who haven’t owned a home in the past three years was driven by data and customer feedback. These highlighted various reasons homeowners might step off the property ladder and return to the rental market. By broadening the criteria, we aimed to support individuals in these situations and make our product more inclusive.”
Since launch, the society has received £158m in applications. Lloyd added that if rates reduce as is forecasted, we may see an uplift in Track Record applications, as the product rate is also a factor that determines the maximum loan.
April Mortgages
April Mortgages provides borrowers with an alternative to short-term fixed rates while still offering flexibility to borrowers.
Launched in April this year following a six-month pilot, applicants can borrow up to six times their income, taking out a rate fixed for 10 or 15 years.
The rate of interest automatically lowers as the customers pay down their loan and their LTV reduces. There are no early repayment charges (ERCs) if you choose to move home, and overpayments are uncapped.
April Mortgages’ deals are aimed at any borrower who wants more certainty over their budget than a 2-5-year fixed rate can offer, but who also does not want to be locked into the deal should they need to move home.
Mark Eaton, chief operating officer, said: “In an uncertain and turbulent interest rate environment, borrowers are thinking more carefully about their risk appetite and recognising that shorter-term deals can leave them exposed to economic volatility and extreme payment shocks.”
April Mortgages says it is continuing to innovate, prioritising product developments based on the feedback it gets from brokers and borrowers.
Nationwide
Nationwide’s Helping Hand mortgage offers borrowers a high-loan-to-income (LTI) ratio with as little as a 5% deposit if they take out a five- or 10-year fixed rate.
The society says its enhanced LTI ratio, compared to the market standard LTI ratio of four-and-a-half times income, gives potential homeowners a 33% uplift in the amount they qualify to borrow.
The deal was launched in April 2021 with a five-and-a-half times LTI ratio, which was extended to six times earnings in September 2024.
The products are aimed at would-be first time buyers who are comfortable locking in their interest rate for at least five years. Nationwide says this gives the borrower a level of payment security, which, combined with minimum income criteria and a prudent application assessment, means that the society is comfortable lending more.
Since its launch, Nationwide has lent more than £8bn through Helping Hand – supporting more than 40,000 people onto the property ladder, proving particularly useful in areas such as Brighton and Hove, East Sussex, Canterbury, Oxfordshire and Milton Keynes.
Continuing to innovate, Nationwide recently announced that homemovers may benefit from enhanced affordability when applying for a mortgage. The enhanced criteria are available for employed and self-employed applicants and also on new-build purchases.
Perenna
Perenna launched to the market in January 2024 with its ultra-long fixed rate mortgage deals ranging from 10 to 40 years.
Despite having to lock into a rate for at least a decade, the product has flexible features. Borrowers are given the ability to leave the deal after five years without any ERCs.
Borrowers are given an affordability boost, as Perenna is able to lend up to six times income, which could be the difference between accessing homeownership and not being able to.
Perenna says it has seen considerable interest in its products, and as consumers seek out solutions to the homeownership crisis, it expects this interest to grow.
The lender says the problems it is trying to solve are supported by think tanks like the Tony Blair Institute, property portals like Zoopla, and the new Labour government.
Perenna describes itself as an “innovative mortgage product manufacturer and funder”, which means that as the market evolves and consumers are faced with different challenges, it can use its unique banking model to find new solutions to help mortgage borrowers.
Accord
Accord’s £5k Deposit Mortgage launched in March this year and was designed to help borrowers who are struggling to save for a deposit. First-time buyers with a £5,000 deposit can purchase a property valued up to £500,000. The deal is only available for residential house purchases and the maximum age at the end of the term is 70.
The product was launched after internal research showed that £5,000 would shorten the time needed for first-time buyers to get mortgage-ready, regardless of where they live in the country.
According to the lender, compared to the traditional 5% deposit, the £5k Deposit Mortgage reduces the time it takes them to save for a deposit from a maximum of seven-and-a-half years (in London) to around two-and-a-half years, making it accessible to borrowers who may not have outside support to finance it.
Accord says it is always looking to innovate and help brokers to support more clients in navigating a path through ongoing market challenges and complexity – which will continue in 2025.
