Just tune into any news report or web article and it doesn’t take long to be reminded that we’re in the middle of a cost-of-living crisis. From rising food costs to energy bills, every penny is a prisoner, and for first-time buyers battling with rental costs, saving can be particularly difficult. 

In May 2023, the Track Record Mortgage was introduced to give UK renters the opportunity to buy a property without the need for a deposit. Instead, each buyer’s rental payment history is used as evidence of affordability and steps in place of a deposit.

Our Mortgage & Protection Adviser, Danielle Watt, covers all bases of the Track Record Mortgage in her explainer Q&A…

What’s your take on the Track Record Mortgage? 

“I think it’s a great offering to renters struggling to save to buy a home – especially for those who diligently manage their finances. Saving for a deposit is a real barrier for so many people and the Track Record Mortgage is definitely a light at the end of the tunnel.

“The scheme was initially set up just for first-time buyers, but the criteria has since been expanded to allow previous mortgage holders who haven’t owned a home within the last three years to take advantage.

“There aren’t too many restrictions in place either. For example, you can use this type of mortgage to buy a flat or house in either new build or pre-loved condition.”

What’s the eligibility criteria? 

“Firstly, you have to be 21 years or older and have evidence that you’ve paid rent continuously for 12 months over an 18 month period. For example, if someone had been renting and moved back in with their parents for six months to save, you’d still be eligible to apply as long the renting falls within that 18 months. 

“As expected, mortgages are only granted if buyers meet the precautions of a standard credit check and it’s crucial that you haven’t missed any payments in the last six months. 

“The Track Record Mortgage isn’t just for first-time buyers either. As long as purchasers haven’t owned a home in the last three years (and meet the above criteria), they can also take advantage of this scheme.

“Another thing to highlight is that unfortunately this mortgage isn’t available to those living in Northern Ireland.”

This sounds too good to be true, there must be a catch?

“It’s natural to think that there’s going to be a catch with the Track Record Mortgage as getting a mortgage without a deposit is almost unimaginable. In the late 90s, the 100% mortgage scheme offered a deposit-free mortgage, but that came to an abrupt stop after the financial crash in 2008 which made deposits an essential mortgage component. 

“There are, however, some key stipulations in place. One thing I would flag about this type of mortgage is that it’s offered at a five year fixed rate, meaning that the interest rate associated with your mortgage is in place for that five year period. It’s not a bad thing by any means, as you get peace of mind that your monthly payments will remain the same for those five years despite any interest fluctuations. 

“The downside, though, is that you won’t get to take advantage of any drops in interest rates during that time. It’s really down to financial circumstances, but if you can comfortably afford the monthly mortgage payments, I would recommend considering this particular mortgage type.” 

Is there a cap on how much you can borrow through the Track Record Mortgage?  

“There is a cap, but it’s not as low as you might think! 

“Buyers can borrow up to a maximum of £600,000, so for the majority of buyers looking to use this scheme, this is an ample amount for those buying their first home or rejoining the property ladder.”

What benefits does this mortgage bring to potential buyers?

“The biggest bonus is that it opens up the opportunity for more people to buy a property in the UK. The thought of owning a home is out of reach for people who aren’t able to save as much as they would like to, so this scheme really does lighten the load considerably.

“Take the deposit out of the equation and just owning your home in general has so many benefits. You have your own space, freedom and security, but you also might find that your monthly mortgage payments will be lower than your rental payments. 

“And even if you’re not saving money, knowing that you’re now paying into your own mortgage pot rather than someone else’s makes all the difference. Your home is yours and you’re in control – it doesn’t get much better than that.”

What is your advice to anyone using this type of mortgage? 

“If you find yourself in the lucky position of your monthly mortgage payments being lower than your rental payments, don’t get too excited about the prospect of spending that extra disposable income. We would strongly encourage buyers under this scheme to top up their contractual monthly mortgage payments where possible. Skipton Building Society has an overpayment facility which allows borrowers to do this.

“Every lender has an overpayment amount which allows mortgage payers to pay extra money each year to take down their total mortgage repayment sum. This will reduce your mortgage faster and will help to protect against negative equity.”

Can I still use a deposit with the Track Record Mortgage?  

“If you’ve done the leg work and saved up some money, you can still put down a deposit under the Track Record Mortgage, but your deposit must be less than 5% of the property’s purchase price. Any more than that then it’s likely there will be another mortgage product more suitable for your needs.” 

How does the process work? 

“The team at Gail Reid Mortgage Services will be with you, guiding you through the process. Initially, we’ll find out about your circumstances and establish your goals. We’ll collect your payslips and bank statements which allows us to calculate your mortgage affordability. Together, we’ll explore all of the available mortgage options with you, including Track Record. 

“Not enough people are talking about the Track Record mortgage and I’m looking forward to helping potential buyers take advantage of it!”

Could the Track Record Mortgage be your ticket to climbing the property ladder? Get in touch with the team at Gail Reid Mortgage Services to talk through your options.