The ‘Rent to Own’ mortgage, launched by Hanley Economic Building Society in Stoke-on-Trent, allows tenants with at least 12 months of rental payment history to buy a home without putting down a deposit.
It is aimed at renters who can afford mortgage repayments but struggle to save the deposit required by most lenders.
Under the scheme, buyers can borrow up to £350,000 at an interest rate of 5.79 per cent, available exclusively as a five-year fixed rate.
Applicants must earn at least £25,000 a year, and borrowing is capped at 133 per cent of their current monthly rent.
However, the rate is significantly higher than many mortgages that require a deposit, meaning monthly repayments will be more expensive.
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By comparison, Leek Building Society currently offers a rate of 4.56 per cent for five years with a 5 per cent deposit, while the Co-operative Bank has a two-year fixed rate of 4.5 per cent for the same deposit.
Hanley Economic Building Society piloted the product in its local area before rolling it out nationwide.
The move follows the return of 100% mortgages to the market in recent years.
Skipton Building Society was the first to relaunch a no-deposit mortgage in 2023, later joined by lenders including April and Gable.
Skipton’s mortgage allows borrowers to take out loans of up to £600,000, significantly more than Hanley’s cap.
While such mortgages can offer a route onto the property ladder, experts have warned they carry greater risks.
Buyers who borrow the full value of a property are more vulnerable to negative equity — where the outstanding loan exceeds the home’s value — if house prices fall.
Ranald Mitchell, director at Norwich-based Charwin Mortgages, said: “In practice it’s simple: if you can prove you have been paying rent on time and your new mortgage payment stacks up against what you already pay, you may be able to buy without saving a chunky deposit.
“The flip side is that you’re buying with no safety cushion.
“If house prices dip, you can end up in negative equity, and because it’s a specialist 100% product, the rate is often higher than the cheapest deals on the market.
“You’ll also need squeaky-clean recent payment conduct.”