Data from moneyfactscompare.co.uk reveals almost one in five (17%) first-time buyers are seeking mortgages with a maximum loan-to-value ratio of 60%, which would require a deposit of around £110,000 for an averagely priced home.
The figures ‘shine a light on the growing divide in the first-time buyer market’, according to NAEA Propertymark president Mary-Lou Press, who said it’s ‘striking’ that almost one in five new buyers are able to enter the market with deposits of 40% or more. She added:
“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.”
According to the data, almost one in three (31%) first-time buyers are opting for 90% LTV mortgages, with a further 10% looking at 95% LTV options. Buyers relying on deposits of 5-10% would expect to pay a deposit of between £13,650 and £27,300, which would result in a monthly payment of around £134 more than those with a larger deposit or equity to borrow the same amount.
Adam French, head of news at Moneyfactscompare.co.uk, commented:
“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. 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.”
Without decisive policy action to support first-time buyers, Press believes homeownership will be placed out of reach for a growing proportion of the population. She added:
“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.”
