Brokers say 5–10% deposits are now in demand as borrowers balance faster access with long-term risk
High loan-to-value lending is edging back into the mortgage mainstream as lenders compete for borrowers with smaller deposits – but brokers say the real dividing line is not LTV, it is affordability, behaviour and advice.
Against a backdrop of rising house prices and stretched household finances, advisers report that demand for 90–95% LTV products remains strong, particularly among first-time buyers who see small-deposit lending as the only realistic route onto the housing ladder.
“We’ve seen sustained demand for high LTV mortgages, particularly from first-time buyers,” said Adam Smith (pictured top left), director of Alfa Mortgages. “The majority are proceeding with deposits of between 5% and 10%, as that is what’s realistically achievable for most people.
“As interest rates have started to ease, confidence has improved, and more buyers are comfortable borrowing at 90–95% LTV. When affordability improves and rates stabilise, appetite for higher LTV borrowing naturally increases.”
For many, the source of the deposit – whether built up through personal savings or boosted by gifts and inheritance – matters less than the ability to meet repayments over the long term. With property prices still high relative to incomes, brokers say the traditional expectation of a 20–25% deposit is out of reach for a large segment of would-be homeowners.
Smith argued that high LTV products have a clear role in easing that barrier. He sees them as a practical response to the gap between wages and house prices, rather than a return to pre-crisis risk-taking. “High LTV products reduce the upfront barrier to entry,” he said. “Saving a 20–25% deposit is simply unrealistic for many aspiring homeowners, particularly with property prices under £300,000 still requiring substantial cash deposits.
“A 5–10% deposit is far more attainable and allows financially responsible buyers to move forward sooner rather than spending years trying to bridge an ever-widening savings gap. In many cases, it’s the difference between renting indefinitely and starting to build equity.”
That long-term framing is central to how advisers say high LTV borrowing should be assessed. The most obvious risk is heightened exposure to short-term price movements. With only a small equity buffer, buyers are more vulnerable to falls in house values and to remortgage challenges if product options tighten.
Smith acknowledged that risk but stressed that most of his clients plan to stay put for a decade or more, and are increasingly remaining in their first homes for longer due to the cost of moving. “When viewed through a long-term lens, short-term market fluctuations tend to be less significant,” he said. “The key is ensuring clients understand the risks from the outset and structure their borrowing responsibly.”
Nick Hayes (pictured top right), managing director of Pia Financial Solutions, also pointed to the way market conditions can amplify those risks at review. For him, the danger is not only negative equity but also the possibility that borrowers are forced to refinance on less favourable terms if they have not reduced their LTV by the time their initial deal ends.
“If the housing market takes a downturn, the homeowner could find themselves either in negative equity or needing to get another high LTV product when they come to remortgage,” Hayes said. “The risk is then that high LTV mortgages may not be available or the rates could be higher than they are currently.”
Slower price growth creates a different, but related, problem. Without significant capital repayment or value uplift, borrowers may struggle to drop into more competitive LTV tiers, even if they have always paid on time. Hayes warned that this could leave some higher LTV clients boxed into a narrower set of remortgage choices.
Despite these concerns, neither adviser reported a clear-cut pattern of higher arrears or stress among small-deposit borrowers. “Mortgage stress is far more closely linked to financial behaviour, budgeting discipline and lifestyle choices than to loan-to-value alone,” Smith said. “When affordability has been assessed properly and expectations are set clearly, high LTV clients perform no worse than those with larger deposits. Good advice and realistic planning are far more important than the size of the initial deposit.”
For advisers, this places responsible lending squarely at the intersection of lender criteria and broker practice. Passing a calculation is not enough, Smith argued; the test is whether repayments can be sustained without undue pressure if circumstances change. “The line should be drawn at genuine affordability — not just what passes a lender’s calculator, but what a client can comfortably sustain without financial pressure,” he said.
“A detailed, transparent budgeting discussion at the outset is essential. Stress-testing repayments, planning for future rate movements and ensuring clients retain financial headroom are all critical. Responsible advice is about balancing opportunity with prudence — enabling access to homeownership without compromising long-term financial wellbeing.”
Both brokers returned to the same theme: high LTV lending is a tool, not a verdict on a borrower’s prudence. Used appropriately, it can help the right clients buy sooner and start building equity, rather than remaining in the rental sector. Used without sufficient scrutiny, it can leave households overexposed to shifts in rates and house prices.
Smith summed up that case-by-case approach. “High LTV borrowing is neither inherently risky nor inherently beneficial — it is entirely dependent on the individual,” he said.
“Every client has different circumstances, risk tolerance, financial habits and long-term objectives. The role of a good adviser is to align the product with the person. When structured correctly, high LTV lending can be a highly effective tool for the right client.”
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