Low-Deposit Mortgages Reach 17-Year High, Offering New Opportunities for First-Time Buyers

The availability of low-deposit mortgages in the UK has reached its highest level since the financial crisis of 2008, according to new figures from Moneyfacts. For first-time buyers, this marks a potential shift in accessibility to homeownership, following years of restricted lending criteria and limited product choice. As of April 2025, there are 442 mortgage products available for borrowers with a 5% deposit, a significant increase from the 204 on offer two years ago. Products requiring a 10% deposit have also grown in number, now totalling 845, up from 684 in April 2023. This expansion suggests growing confidence among lenders and a more competitive environment for consumers.

Interest Rates Remain Elevated

Despite the increased product range, interest rates for low-deposit mortgages remain high by historical standards. The average rate for a 95% loan-to-value mortgage remains above 5%, while those able to provide a 40% deposit benefit from lower rates, often below the 5% threshold. This discrepancy continues to present affordability challenges for lower-income households or those without access to significant savings. That said, recent months have seen subtle changes in the lending landscape. Several high-street banks, including Halifax, Lloyds, Barclays, and the Co-operative Bank, have eased lending criteria or adjusted their rates downward. Some have reduced their internal stress tests, potentially allowing borrowers to access higher-value loans. These shifts, while modest, indicate a more flexible approach from institutions traditionally seen as cautious since the 2008 crash.

Government Intervention and Policy Support

The increased availability of 95% LTV products has been further supported by government policy. A new, permanent mortgage guarantee scheme is now in place, intended to encourage lenders to offer high-LTV products by mitigating some of the associated risks. The scheme is designed to promote homeownership among first-time buyers and younger borrowers, particularly those with limited access to generational wealth or equity from previous properties. While this initiative provides a degree of security for lenders, its effectiveness still depends on borrower affordability in an environment of elevated interest rates and high living costs. Mortgage affordability, particularly when measured against take-home income, remains a central issue for policymakers and housing advocates alike.

Property Market Conditions

Data from property portal Zoopla indicates that competition remains high among buyers, particularly in the lower and mid-range segments of the market. On average, properties in England and Wales remain on the market for 36 days before an offer is agreed. Homes with two bedrooms typically sell the fastest, with an average time to offer of just 23 days.

Regional variation remains a defining characteristic of the UK housing market. Cities in the North of England, such as Manchester, continue to see faster transaction times compared to parts of London and the South East, where higher property values and stamp duty costs contribute to slower sales cycles.

The Importance of Strategic Financial Planning

While the increased number of low-deposit mortgages is a step in the right direction, it does not automatically translate into accessibility. High borrowing costs, legal fees, and ancillary costs such as surveys, stamp duty, and insurance still form substantial barriers for many would-be homeowners. Navigating the mortgage process, especially as a first-time buyer, requires clear-eyed financial planning and an understanding of the full cost of ownership. Product selection alone is not enough; it is the structure, term, rate type, and long-term viability of the mortgage that will determine whether homeownership is genuinely sustainable. Three Keys Mortgages works directly with first-time buyers to help them access the most appropriate mortgage solutions. Our role is not just to help clients find a product but to ensure they understand its long-term implications financially and personally.

The expansion of low-deposit mortgage products is one of the most encouraging developments for UK first-time buyers in recent years. However, the realities of affordability, high interest rates, and market competition remain present. For those ready to enter the housing market, preparation, guidance, and financial clarity are more essential than ever.

For expert advice tailored to your personal circumstances, contact Three Keys Mortgages today.