Skipton launches mortgage with no repayments for first three months

First-time buyers can skip mortgage repayments for the first three months of homeownership with a new ‘Delayed Start’ mortgage from Skipton Building Society. The three-month period will not be free, as interest will still accumulate and add to the overall mortgage balance. However, many first-time buyers will find the extra cash comes in handy as the unavoidable costs of moving home start to hit. The mortgage deal is only available to first-time buyers borrowing up to 95% of a property’s value.

How does the Delayed Start mortgage from Skipton work?

First-time buyers will be able to skip the first three payments on a new 'Delayed Start' mortgage from Skipton. At least one of the buyers will need to be purchasing their first property and the deposit will need to be at least 5% of the property value. The mortgage debt will continue to grow with interest during this period.

In support of its new product, Skipton has highlighted research showing that of 1,000 people who had bought their first home in the past five years, 71% said that moving cost significantly more than expected. 63% said they felt financially strained, with Skipton’s data showing a nearly £3,500 average spend on furniture and £2,600 on kitchen appliances.

One often overlooked moving expense for first-time buyers highlighted by Skipton was the overlap between renting and buying. Around 35% of first-time buyers were paying for two properties as their rental agreement continued after moving into their new home.

Head of mortgage products at Skipton, Jen Lloyd, said: “Becoming a home-owner should be one of the most exciting milestones in someone’s life; however, our research shows that first-time buyers are struggling and feel the cost associated with the move takes the shine off getting on to the property ladder.

“That’s why today I am pleased to announce the launch of Skipton Delayed Start mortgage, giving first-time buyers some breathing space with no mortgage repayments due for the first three months.

“We hope that this product will help first-time buyers settle into their new home and help ease the strain of the costs that come with buying a first home that go beyond the deposit.”

Will a Delayed Start mortgage save you money?

At the time of writing, Skipton is offering a Delayed Start two-year fixed-rate of 5.2% or a five-year fix at 5% for borrowers with a 95% LTV (loan to value), and a two-year fixed-rate of 4.87% or a five-year fix at 4.78% for those with a 90% LTV. This compares to the best first-time buyer rates of 4.85% for a two-year fix or 4.75% for a five-year fix at 95% LTV, and 4.44% for a two-year fix or 4.29% for a five-year fix at 90% LTV.

This means that the Delayed Start mortgage will cost you more in interest versus the best available rates on standard mortgages for first-time buyers. You can find out more about the latest deals on our ‘Best mortgage rates in the UK’ page.

Keep in mind that while the Delayed Start deal is a new type of mortgage product, the initial three-month period is essentially a form of payment holiday. These are not new and are usually available to borrowers struggling to meet their repayments. They grew in popularity during the COVID-19 pandemic as homeowners looked for breathing space to adjust to reduced incomes or periods of illness.

In particularly challenging times, a mortgage payment holiday can help you avoid late repayments and give you time to reassess your debts. It is possible to save money through a payment holiday if the alternative is taking out more debt, especially if it is high-interest borrowing – the cost of putting a dishwasher or sofa on a credit card could quickly eclipse what is added to your mortgage debt if you do not clear the balance within any 0% period – but it is not a way to save money in and of itself. Your debt would continue to grow with interest while you are not paying it off, leaving you with a larger mortgage than you started with when you eventually make your first repayment. This would mean that in order to clear the increased loan amount, either your monthly repayment will be higher or your mortgage term will be longer, when compared to a standard mortgage.

How to get the best deal on your mortgage

Taking out a Delayed Start mortgage means you are starting your homeowner journey with a payment holiday of three months. This could be invaluable to first-time buyers concerned that rising stamp duty, conveyancing fees, repairs and furnishing costs will leave them struggling to make their first few repayments. However, it will likely cost you more in the long run. This is in part due to Skipton’s Delayed Start rates not being the best on the market and the fact that you will end up paying more interest overall by not making any repayments in the first three months while your debt continues to build with interest.

The best way to ensure that you choose the right mortgage for your circumstances is to speak with a mortgage broker. Mortgage brokers have in-depth knowledge of the mortgage market and can help you get your application accepted. There are also several broker-only mortgage deals that you cannot access unless you go through a mortgage broker. You can find a mortgage broker that suits your needs and location using the online directory of financial professionals, Unbiased*. The directory allows you to search based on the type of advice you need and also based on the experiences of other customers. Alternatively, you can get free mortgage advice from online mortgage broker, Habito*.