Deposit challenges force buyers to maximise borrowing
First-time buyers across the UK are increasingly relying on high loan-to-value (LTV) mortgages, according to an analysis of UK Finance figures by digital surveying platform HouzeCheck.
The data shows a steady rise in the average LTV on new first-time buyer mortgages over the past year, suggesting a growing dependence on borrowing amid continued challenges saving for deposits.
In England, the average LTV for first-time buyers increased from 74.7% in Q1 2024 to 77.1% in Q1 2025, a 2.4 percentage point rise. Scotland saw a similar trend, with LTVs rising from 81% to 82.4% over the same period – the highest levels across any UK region or home nation.
“The days of massive equity cushions are over – and they are unlikely to return anytime soon,” said Richard Sexton (pictured), commercial director at HouzeCheck. “First-time buyers are borrowing more to finance property purchases.
“Some would argue that it’s a sign of confidence in the market. I don’t think that’s the case: it’s a sign that potential first-time buyers living in rented accommodation can no longer save for deposits.”
According to Sexton, the shrinking rental stock and rising rents – partly due to landlords exiting the market – are making it harder for aspiring buyers to save, especially in areas like Scotland where regulatory changes began earlier.
“The average LTV for a new first-time buyer mortgage in Scotland is high, even compared to London, and it’s still rising,” he said. “Housing is a devolved matter and anti-landlord legislation started earlier north of the border nudging up rents, limiting tenants’ ability to tuck money away.”
Sexton also warned of the risks tied to zero deposit and high LTV lending. “Zero deposit mortgages may lower the barrier to entry today, but they leave borrowers exposed to downturns in house prices,” he said. “With no equity buffer, or just a thin one, negative equity becomes a real risk — especially if the market softens or economic conditions tighten unexpectedly.”
He added that borrowers at high LTVs tend to face higher borrowing costs, including elevated interest rates and fees, which could put financial pressure on those already stretched. “Income shocks, such as job losses or rising living costs, could quickly push borrowers on stretched budgets to breaking point,” he said.
Regional analysis of England shows the fastest increases in LTVs for first-time buyers were in East Anglia (up from 73.6% to 76.2%), the South East (up from 74.0% to 77.3%), and Greater London (from 67.1% to 72.0%).
Sexton cautioned that rising LTVs could introduce new vulnerabilities. “Critically, if high LTV borrowing becomes the new normal, it risks increasing systemic risk across the housing market,” he said. “A generation of buyers taking on maximum leverage to buy homes when prices are by no means rising could create a house of cards — one that lenders, regulators, and the wider economy may ultimately have to reckon with.”
“Responsible lending and robust affordability testing are now more vital than ever to prevent enthusiasm from tipping into overextension.”
Home movers in England are also taking on more debt relative to their property values. The average LTV for this group rose from 63.1% to 64.9% year-on-year, according to the data.
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