How much does a 100% mortgage actually cost?

New research looks at how much more a 100% mortgage mortgage could cost homebuyers in current market conditions.

Related topics:  Finance,  Property,  mortgages
Property | Reporter
7th September 2023
FTB 77

Specialist property lending experts, Octane Capital, compared the monthly cost of Skipton’s 100% mortgage for both a first-time buyer and existing homeowner to the alternative mortgage route of placing a deposit via a traditional lender.

First-time buyers

The research shows that back in May when Skipton first launched its 100% mortgage for first-time buyers, the average monthly repayment sat at £1,458 - based on their rate of 5.49% over 25 years and the average house price of £237,542 at the time.

In contrast, the average first-time buyer placing a 15% deposit via a traditional lender was making a full monthly repayment of £1,091 based on the average mortgage rate of 4.22%.

This meant a 100% mortgage was costing first-time buyers almost £370 (34%) more per month - over £4,000 more per year.

Today, Skipton has increased its rate to 6.19%, an increase of 0.7% since May of this year. The average rate offered by traditional mortgage lenders has increased by 1.12% to 5.34% during the same period.

But despite this lower rate of increase, the average first-time buyer opting for a 100% mortgage today is still facing a full monthly repayment of £1,572 - £340 (28%) per month more than those opting for a traditional mortgage having placed a 15% deposit.

Existing homeowners

For existing homeowners looking to climb the ladder via a 100% mortgage, the additional cost of borrowing without placing a deposit is even higher.

Based on the current average house price (£290,785) and when placing a 20% deposit, the average homebuyer would be looking at a full monthly repayment of £1,342 in today’s market.

However, opting for a 100% mortgage would see this monthly cost climb by £565 (42%) per month to £1,907 - nearly £6,800 more per year.

CEO of Octane Capital, Jonathan Samuels, commented: “We’re a nation hell-bent on homeownership and so it’s no surprise that demand for 100% mortgage products has spurred an expansion from first-time buyers to existing homeowners.

"However, it’s a potentially dangerous game to be playing in the current climate while interest rates are high and uncertainty remains around just when they are likely to come down.

"As our research shows, the additional cost of a 100% mortgage is substantial and while you may secure a foot on the property ladder without the initial lump sum of a deposit, you will certainly pay for the pleasure in interest owed and then some."

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