Borrowers can take out the deal as a 10-year or 15-year fixed rate and there are no early repayment charges meaning customers will not face penalties if they move home.
The rate on the mortgage, which starts at 5.99%, automatically drops as more of the loan is paid off so, over the years, the repayments will gradually decrease.
Customers can also make unlimited overpayments – which means people have the opportunity to pay down their mortgage more quickly if they wish.
April requires borrowers to have a steady income of at least £24,000 and a clean credit history.
The product has been welcomed by brokers who see first-hand the struggle faced by would-be buyers to build enough of a deposit to get onto the expensive property ladder.
There may be concerns about the introduction of a 100% mortgage to the market which does not involve guarantors. Indeed, the product is aimed at those people who do not have the advantage of the Bank of Mum and Dad.
Following the financial crisis in 2008 mortgage-free deposits were stamped out to protect homeowners from falling into negative equity.
But, with April’s product, the minimum term of 10 years is the key here because locking in for this length of time reduces the risks of negative equity.
There are other safeguards in place too. Borrowing is capped at £600,000 and applicants may only borrow 4.49 times their income.
Gemma Bennett, senior mortgage broker, at The Mortgage Mum, which is one of the brokers to be handpicked by April Mortgages to advise customers considering this mortgage, explained more.
She said April Mortgages was a UK lender with a Dutch origin. “They say from a Dutch perspective they feel we as English gamble so much with our mortgage” she said. “Never knowing the market conditions coming at remortgage and the lifetime of a mortgage.”
Bennett was among many brokers who have welcomed this new product to the market today. She said: “In my opinion it’s absolutely brilliant to see innovation. Although the headline 100% mortgage initially conjures up scepticism based on previous past models this is a brand new concept routed in certainty and responsible lending.”
David Hollingworth, associate director at L&C Mortgages, said: “April’s new deal will add another option to those that have strong affordability but can’t amass a deposit, whilst meeting high rents and living costs.
“Borrowers will need to evidence their ability to meet mortgage payments. In addition, they should think about the higher potential for negative equity if property prices were to fall.
“Negative equity becomes a problem for those that need to sell, crystallising any loss. The stability of a fixed rate will provide shelter from fluctuating interest rates, which could help them ride out a dip in prices.”
Meanwhile, Justin Moy, managing director at EHF Mortgages talking to Newspage Agency, said the launch had the feel of a seismic event within the mortgage market. But he warned the 100% deal would not suit everyone.
“The reaction from other high street lenders will be interesting,” he said. “Some will have plans for a similar product so the reaction to this from April may twist the arm of others to try their luck, too. A great move, but it’s not the right solution for everyone.”
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