Mortgages 100% loans are back - will they work for you?

The controversial loan has returned with a crop of deals. Rupert Jones looks at each and explains why it is worth saving for even a 5% deposit

- Rupert Jones

Saving up for a deposit is one of the biggest challenges facing would-be homeowners, who can find most of their money is swallowed up by rent and living costs.

No-deposit deals - known as 100% mortgages - can provide a lifeline, and in recent months a new crop have come on to the market.

But in return for not having to put down a deposit, you will have to pay a higher interest rate. Also the affordability rules and lending limits that apply on these loans mean they probably will not be an option for many in pricier areas such as London or for some people considering a larger property.

This type of mortgage is controversial, too, because homebuyers who take them out are particularly vulnerable to house price falls, as they have no equity to cushion them if there is a drop in the value of their home. Even a small fall in prices could leave some owing more on their mortgage than their home is worth.

We have looked at the details of each of the no-deposit deals. We also explain how, if you can save up a deposit - 5% is good, but 10% is better - this will give you access to more competitive rates and reduce your monthly outgoings.

100% deals Standard home loans where the borrower does not have to put down a deposit used to be fairly common but disappeared after the 2007-08 financial crisis when lenders were concerned about the outlook for property prices.

Two years ago, Skipton building society launched a 100% deal, called Track Record, aimed at people who are now renting, or were until very recently.

Last month, two more lenders, April Mortgages and Gable Mortgages, launched their own no-deposit deals.

It is very difficult to single out one 100% deal as "the best" on the market, says Mark Harris, the chief executive of the mortgage broker SPF Private Clients. "There are positives and potential drawbacks to every product. Every borrower's situation is different and therefore different outcomes will apply."