The mortgage you don’t pay for three months: Is it helpful or just a gimmick?

First-time buyers are now being offered the chance to get a mortgage without having to make repayments for the first three months. 

The mortgage is with Skipton Building Society, and is available to those buying with smaller deposits. 

Known as the Delayed Start Mortgage, it is intended to give borrowers some financial breathing space and help them to budget for other costs such as furniture and decorating.

It is even being endorsed by Location Location Location property expert, Phil Spencer.

We run the rule over the mortgage deal, explaining how it works, who can get it, and whether it will cost them more in the long run. 

Helping hand? Skipton’s Delayed Start Mortgage will give first time buyers time to settle in with no mortgage repayments due for the first three months

Who can get the Delayed Start Mortgage? 

Skipton is offering the product to those buying with either a 5 per cent or 10 per cent deposit.

While the deal is exclusively for first-time buyers, if buying as a couple, then only one person needs to be a first-time buyer to qualify.

What are the interest rates? 

In terms of rates, those buying with a 10 per cent deposit could secure a two-year fix at 4.87 per cent or a five-year fix at 4.78 per cent.

Those buying with a 5 per cent deposit could secure a rate of 5.2 per cent when fixing for two years or 5 per cent if fixing for five years. There are no arrangement fees attached to the mortgage.  

Someone buying their first home with a £200,000 mortgage on a 5 per cent rate could expect monthly repayments of £1,074.

Skipton’s Delayed Start Mortgage would therefore save them £3,222 over the first three months.

However, the interest will still accrue from day one and will be added to the overall mortgage balance. This means they will pay slightly more in interest over the term. 

Based on the same scenario, the interest would accrue at £834 a month, meaning an additional £2,502 would be added to the total mortgage balance.

This means their monthly payments going forward would be slightly higher than they would have been if they had paid the mortgage right from the off.

In this scenario it would mean they would be paying £1,088 a month rather than £1,074 a month.

How do the rates compare? 

The rates on the Delayed Start Mortgage aren’t the cheapest on the market, so it is worth weighing up how much the delayed repayments would benefit you, and whether you would prefer to save on your monthly payments in the long run. 

For example, Virgin Money has a two-year fixed rate at 4.53 per cent for those with a 10 per cent deposit, which comes with a £995 fee. 

On a five-year fix, HSBC has a rate of 4.39 per cent with a £649 fee. 

For those wanting to buy with a 5 per cent deposit, Monmouthshire Building Society and Nationwide both currently offer two-year fixed rates of 4.85 per cent, with fees of £1,439 and £999 respectively. 

 On a five-year fix, the cheapest rate is with Monmouthshire at 4.75 per cent, also with a £1,439 fee. 

> Find the best rate for you using This is Money’s mortgage search tool 

Why has Skipton launched it? 

The aim is to give first-time buyers some breathing room in the immediate aftermath of purchasing a property. 

First-time buyers are spending upwards of £30,000 in the first three months of moving into their new home, according to Skipton’s research. 

The mutual surveyed 1,000 first-time buyers and found that almost two thirds felt financially strained during this time. 

Seven in 10 first-time buyers said the moving process cost a lot more than they expected.

Skipton’s research also revealed first-time buyers spend nearly £3,500 on average on furniture to kit out their homes, as well as £2,600 on kitchen appliances. They also face a bill of £1,700 on removal companies, Skipton claims. 

More than two thirds of first-time buyers also had to juggle costs for two properties, as rental agreements often overlap with moving in. 

More than four in 10 found it difficult to line up their move with the end of their lease, with 26 per cent blaming delays in the buying process, according to Skipton’s research.

Is it a good option for buyers?

Skipton delayed mortgage product certainly has its merits and many across the industry have welcomed what they deem as much needed support for first-time buyers.

Property expert Phil Spencer, founder of the property website Move iQ, is one of those in favour.

‘Buying your first home is a huge milestone, but for many, making the leap from paying rent to managing a mortgage can feel overwhelming,’ he says.

‘That’s why I’m genuinely excited about Skipton Building Society’s new Delayed Start Mortgage. It offers first-time buyers some much-needed breathing space at exactly the right moment.’

Not all are convinced, however.

Harry Goodliffe, director at mortgage broker HTG Mortgages, says: ‘Let’s be real – if you need a break before you’ve even started paying the mortgage, it’s worth asking whether the timing is right.

‘Interest still racks up from day one, so this isn’t free money. It’s a lifeline, not a longer-term fix.’

Ben Perks, managing director at Orchard Financial Advisers, adds: ‘This could be great for those borrowers that need to renovate or modernise a property on entry,’ said Perks. ‘But if it’s used to help cash-strapped borrowers, things could get messy. 

‘If you need to start your mortgage life with a payment holiday, should you be starting?’