The 5&5 Concessionary Mortgage sees landlords offer tenant buyers a 5% discount on the purchase price of the property. The buyer contributes their own deposit on top – this must be a minimum of 5%.
It means tenants and first-time buyers, who often struggle to get onto the housing ladder because of the high cost of raising a deposit, can gain a helping hand into homeownership.
Meanwhile, it also provides a solution for landlords looking to sell due to tax changes, which have come into force in recent years.
TSB said government data showed a third of landlords were planning to sell their rental properties in the next two years. This 5% option could, therefore, offset the 5% discount through savings on estate agent fees or paying several months of mortgage interest when the property is empty.
Roland McCormack, mortgage distribution director at TSB said: “TSB Concessionary Mortgages are already helping customers to bridge the gap between renting and home ownership, making it easier for tenants to secure the property they already call home.
“Increased mortgage costs mean many landlords want to release their gains and exit the market, and a 5% discount could be entirely offset by the savings on estate agency fees and not missing out on several months of rental payments.”
The 5&5 mortgage will operate in addition to TSB’s 10% scheme where landlords sell their property to a tenant with a 10% discount or more on its market value, meaning the buyer doesn’t need a deposit.
What are concessionary mortgages?
Concessionary mortgages are usually more of an arrangement with the lender than a specific mortgage product. They are most commonly used by families – where a parent is selling a property to their adult child, for example, and they offer it at a lower price.
David Hollingworth, associate director at L&C Mortgages, explained: “Lenders can often accept this approach, enabling the mortgage to be taken against the full market value of the property.
“That could allow the buyer to purchase the property without even needing a deposit and to still be able to access lower [loan-to-value] mortgage rates, although some lenders will prefer to see some of the deposit coming from the buyer.”
Where TSB’s product provides some innovation in this market is that, whilst according to Hollingworth many lenders will happily accept a concessionary purchase where the sale is to a close family member, not all will be able to help where a landlord is prepared to give a discount to their tenant.
He continued: “With landlords being affected by the rising mortgage rates, tougher criteria and higher tax bills some will inevitably be considering whether to slim down their portfolio despite the budget not imposing any hikes to capital gains tax.
“There could therefore be some benefit to both a tenant and landlord if they are prepared to offer a discount on the purchase price which could help a tenant by effectively boosting the deposit.
“That may help out the tenant but could also be mutually beneficial and help to make for a quicker transaction time, potentially avoiding the need to market the property and the costs that could come from that for the seller.”
Are there any other concessionary mortgages for tenants and landlords?
Moneyfactscompare.co.uk, which tracks data on mortgages, does not record this element of a mortgage arrangement and, as such, there is no information about how many transactions include concessionary elements.
However, Hollingworth said there are other lenders who may consider this scenario and, anecdotally, he had heard of lenders who were being approached with this situation due to the tax hikes landlords now face.
He added: “TSB has clearly thought about how it could open out its policy a little further to help more tenants take the step into home ownership.”
Rachel Springall, finance expert at Moneyfactscompare, meanwhile, said: “The market could always do with more product innovation to help those struggling to get a mortgage as those stuck paying rent may feel their homeownership dreams are scuppered because of the lack of affordable housing, which will take time to improve.
“As we dive into 2025 it will be interesting to see how lenders will balance supporting their existing customers and enticing new business as the future of interest rates remains unpredictable.”
