"A significant proportion of first-time buyers are seeking mortgages at lower LTVs, suggesting that many are receiving significant financial support from family contributions or inheritance"
- Adam French - Moneyfacts
While higher loan-to-value (LTV) mortgages dominate first-time buyer demand, a notable minority are looking for deals with maximum 60% LTV, fresh data from Moneyfactscompare shows.
Among first-time buyers searching for fixed-term deals on Moneyfactscompare.co.uk:
Almost one in three (31%) are choosing 90% LTV mortgages, while 10% are considering 95% LTV options. This suggests many first-time buyers are relying on deposits of 5-10%, equivalent to £13,650 to £27,300 at the average UK house price of £272,995.
Around one in five (17%) are seeking mortgages capped at 60% LTV. A 40% deposit on the average UK house would require roughly £110,000, indicating that this group of buyers is in a stronger financial position.
The data also shows that borrowers with smaller deposits or less equity could be paying around £134 more per month compared with those with larger deposits or higher equity for the same mortgage amount.
Homeowners with approximately 25% equity are more likely to make their next move on the property ladder, suggesting that this threshold may act as a key financial or psychological milestone before progressing to a new home.
“First-time buyers in particular are feeling the weight of affordability pressures, with many relying on more expensive high LTV loans due to the challenges of raising a sizeable deposit," says Adam French, head of news at Moneyfactscompare.co.uk.
"Meanwhile, more established homeowners who have accumulated greater equity are in a better position to benefit from lower LTVs and more competitive mortgage rates."
“However, a significant proportion of first-time buyers are seeking mortgages at lower LTVs, suggesting that many are receiving significant financial support from family contributions or inheritance. This marks a growing divide in the housing market as those without additional financial assistance face greater financial strain, particularly as they are more vulnerable to rising rates or potential housing market corrections.”
Mary-Lou Press, President of NAEA Propertymark, comments, “These latest figures shine a light on the growing divide in the first-time buyer market. While some are having to stretch their finances to secure 90% or 95% loan-to-value mortgages, it’s striking that almost one in five new buyers are entering the market with deposits of 40% or more.
“This clearly points to a two-tier system emerging, between those who can access significant family support or inheritance, and those who must rely solely on their own savings in an environment where affordability remains a major hurdle.
“Rising house prices over many years, coupled with high living costs, have made it increasingly difficult for many young people to build a deposit without outside help. Policymakers should ideally prioritise measures that support genuine first-time buyers, including initiatives to increase housing supply, a review of property-related taxes, and the encouragement of mortgage products that promote accessibility without compromising financial stability.
“Without decisive action, homeownership risks becoming even more out of reach for a growing proportion of the population.”
