Fears have been raised over plans for new zero-deposit mortgages aimed at renters and first-time buyers who lack savings or financial support. 

Skipton Building Society will allow first-time buyers aged 21 and over to take out mortgages at between 95 per cent and 100 per cent of the value of the property they want to buy. 

The fee-free mortgage is a five-year-fixed-rate product with a rate of 5.49 per cent and the maximum mortgage term is 35 years.

In return, people will need to demonstrate a strong track record of paying their rent, with evidence of a minimum of 12 months of rental history, and pass affordability and credit checks.

This evidence could be provided through bank statements or a letter from a suitably registered letting agent, for example.

Experts said the new deal could help some aspiring homeowners to “get off the rental treadmill”, although some said that affordable housing remains in short supply.

Graham Cox, mortgage broker and founder of the SelfEmployedMortgageHub.com, told LBC Radio: “My personal view is this is actually a terrible idea. It’s addressing the symptom of the housing crisis rather than the cause. There’s great danger, bororowers are going to get into trouble if their house price falls and there is a chance of that over the next 18 months. 

“If house prices do fall and they have a 100 per cent mortgage, the mortgage could be worth more than the property. People of a certain age will remember it.

“After the global financial crisis, up until that point around 2005, Northern Rock had a 125 per cent mortgage - they went away as they were seen as too risky.”

Rachel Springall, a finance expert at financial information website Moneyfacts, said: “It is great to see more support for first-time buyers who are struggling to afford a deposit for a mortgage.

“There are very few 100 per cent LTV mortgages in the market, but even if we were to see more innovative deals surface, affordable housing is very much in short supply, and there need to be significant changes to the market to turn this around.

“It is imperative borrowers compare the overall true cost of a deal and attempt to save on the upfront cost if they have used up most of their savings on a deposit, legal fees, or moving costs.”

David Hollingworth, an associate director at broker L&C Mortgages, said: “Skipton’s track record mortgage is attempting to serve a part of the market that has recently been wholly reliant on help from ‘the bank of mum and dad’."

He added: “It won’t solve all the difficulties for all first-time buyers and there will be affordability limitations on the borrowing amount which may still not meet the required purchase price.

“There will always be concerns that no deposit could risk negative equity, but this is a longer-term product for that reason, and if it can help some accelerate the move from renting to home ownership it could be a significant new product.”

Who is eligible for Skipton's 100 per cent mortgage?

People may be eligible if they have paid in full at least 12 months rent in a row within the past 18 months and are looking to borrow up to £600,000.

In the terms and conditions for the track record mortgage deal on its website, Skipton said that it will not lend on new-build flats.

The Society’s definition of a new-build home is one that is being sold for occupation for the first time, which has been newly built or converted within the past three calendar years.

It also said the track record mortgage cannot be used with any other borrowing scheme.

Skipton also said it will be ensuring, when looking at affordability, that buyers will not be paying more on a monthly basis than their current rent.

For example, a tenant paying an average of £800 per month over the past six months will have a maximum monthly mortgage payment of £800.

Charlotte Harrison, chief executive of home financing at Skipton, said: “We need to tackle the UK’s housing affordability crisis to enable more people, especially renters who are trapped in renting cycles, to buy their first home.

“People trapped in renting is one of the UK’s biggest housing challenges, having a massive impact on the fabric of our society.

“With escalating rents and the cost-of-living squeeze further impacting people’s ability to save for a house deposit, it’s making it almost impossible for people get on to the property ladder.”

She added: “It is time for a rethink on these massive barriers to home ownership.”

Ms Harrison said the mortgage “has been carefully created with the challenges generation rent is facing in mind, together with the potential risks and challenges they may encounter in the future too”.

How much are first-time buyers paying now?

Property website Rightmove recently calculated that first-time buyers with a 15 per cent deposit to put down face paying nearly £200 per month more for a mortgage typically than they did a year ago.

The website said those in the 15 per cent deposit bracket would pay an average of about £1,056 per month, compared with £865 last year, due to mortgage rates and house prices rising.

Across Britain, the average asking price for a first-time buyer-type property is sitting at a record of £224,963, according to Rightmove’s data.

The average asking rent for a first-time buyer type property is £1,120 per month, having increased 11 per cent compared with last year, the website added.