Affordability squeeze pushes more buyers to seek high LTV products
Changes to the stamp duty threshold in April have led to a greater proportion of first-time buyers turning to high loan-to-value (LTV) mortgages, according to new data from adviser technology provider Twenty7tec.
The figures reveal that since the stamp duty threshold for first-time buyers was reduced from £425,000 to £300,000, the share of first-time buyers taking out mortgages with an LTV of 90% or higher has edged up from 48.8% to 49.5%. This means almost half of new entrants to the property market are now depending on smaller deposits to secure a home.
Under the revised rules, buyers pay no stamp duty on properties valued up to £300,000. Purchases between £300,001 and £500,000 are subject to a 5% charge, and relief is no longer available for homes above £500,000, down from the previous £625,000 limit.
The data also show a 6.37% decline in first-time buyer mortgage searches, dropping from 1,007,752 in the first quarter of 2025 to 943,554 in the second quarter. This fall is attributed to many buyers expediting purchases ahead of the rule change, resulting in a quieter market in the subsequent months.
“This is a common occurrence when stamp duty rules change,” said Nathan Reilly (pictured), director at Twenty7tec. “Buyers accelerate plans to avoid paying more tax, and the market then cools as that upfront demand is met.
“What’s more concerning is that nearly half of first-time buyers are now relying on 90%-plus loan-to-value mortgages – a sign of how stretched affordability has become. While high LTV products are nothing new, this level of reliance points to the mounting pressures buyers face when trying to get on the ladder.”
Despite the slowdown among first-time buyers, the overall number of standard residential mortgage searches – including those from home movers and remortgagers – increased by 3.95% quarter-on-quarter, rising from 4,167,357 in Q1 to 4,222,591 in Q2.
“The overall market remains strong, driven by those already on the property ladder, who appear unaffected by the stamp duty change,” Reilly said.
Other findings from Twenty7tec’s report include a decrease in the proportion of first-time buyer searches for homes priced above £300,000, which fell from 37.8% in the first quarter to 37% after the changes. The share of overall 90%-plus LTV borrowing also rose slightly, from 21.9% to 22.2%, suggesting more buyers are stretching their deposits amid affordability challenges.
Additionally, the proportion of mortgage searches for products with terms under two years increased from 41% to 46.5%, as more borrowers opted for short-term deals, possibly in anticipation of future interest rate reductions.
“Stamp duty changes never happen in isolation,” Reilly said. “They ripple through the market, affecting behaviour, affordability, and product choice. Advisers will need to continue guiding clients through these shifts as policy and economic conditions evolve.”
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