While higher loan-to-value (LTV) mortgages dominate first time buyer demand, a significant minority are seeking higher deposit deals, new data from Moneyfacts reveals.
Of the first time buyers looking for fixed-term deals on the Moneyfacts comparison site, almost one in three (30%) are opting for 90% LTV mortgages, with a further 12% looking at 95% LTV deals.
But at the other end of the scale, almost one in three (31%) are seeking mortgages with sub-75% LTVs. Based on the average UK house price, a 25% deposit comes in at around £67,800.
Moneyfacts’ analysis shows that borrowers with smaller deposits, or those who have accumulated less equity, could be paying £174 more per month to borrow the same amount as those with a larger deposit or equity pot.
Adam French, head of consumer finance at Moneyfacts, said:
“The wide spread of first time buyer LTV demand reflects a housing market increasingly shaped by unequal starting points. While many first time buyers are stretching themselves with 90–95% LTV mortgages due to deposit constraints, a notable minority are entering the market with substantial deposits, often helped by family support or inheritance.
“The concern is that it is creating a two-tier market where buyers with higher deposits can access cheaper rates and lower monthly repayments, while others pay a hefty premium.”
Mary-Lou Press, president of NAEA Propertymark (National Association of Estate Agents), said the figures reflect a growing divide amongst those who want to get on the property ladder. She explained:
“While it’s encouraging that a proportion of first time buyers are able to enter the market with larger deposits, the reality for many is that high house prices and the cost of living make saving 20–25% simply unattainable without additional support.
“This is creating a two-tier system where those with access to family assistance or inherited wealth can benefit from lower mortgage rates and more choice, while others are forced into higher LTV products with significantly higher monthly repayments.
“To level the playing field, we need sustained action to boost housing supply and build the right homes in the right places, alongside targeted support for first-time buyers to help them save and access affordable finance. Without this, homeownership risks becoming increasingly out of reach for many aspiring buyers, particularly younger households and those without financial backing.”
