New figures highlight divide in first-time buyer market
Nearly one in five first-time buyers are searching for mortgages with a maximum loan-to-value (LTV) of 60%, according to new analysis from Moneyfacts. While high LTV products remain popular among those entering the property market, a notable proportion are seeking deals that require much larger deposits.
Data from the comparison site indicates that 31% of first-time buyers are choosing 90% LTV mortgages, with a further 10% looking at 95% LTV options. These figures suggest that many buyers are relying on deposits of just 5% to 10%, which, based on the average UK house price of £272,995, equates to deposits between £13,650 and £27,300.
However, 17% of first-time buyers are seeking mortgages at 60% LTV or below. Securing such a loan would require a deposit of approximately £110,000 at the current average house price, pointing to a segment of buyers with significant financial resources.
The data also shows that those with smaller deposits, or less equity, could face monthly payments that are £134 higher than those with larger deposits when borrowing the same amount. Homeowners with around 25% equity are more likely to move up the property ladder, with this level of equity potentially serving as an important milestone before purchasing 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,” said 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 industry body NAEA Propertymark, said the Moneyfacts analysis 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,” Press said.
“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.”
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