Low-deposit mortgage choice ‘hits 17-year high’

The number of low-deposit mortgages on the market has reached a 17-year high, according to a financial information website.

Moneyfacts counted 1,360 mortgage products requiring deposits of 5% or 10% in September – marking the highest total since 1,532 options in March 2008.

The low-deposit deals now make up around a fifth (19%) of the homeowner mortgage market overall, its analysis found.

Lower deposit deals are often used by first-time buyers to get onto the property ladder.

The research looked at mortgages on the first available day of each month.

It also found the average “shelf life” of a mortgage was 17 days, down from 21 days in September 2024.

Rachel Springall, a finance expert at Moneyfacts, said: “Borrowers with a limited deposit or equity of just 5% or 10% will find the choice of higher loan-to-value (LTV) deals has risen to its highest point in 17 years.

“However, it is worth noting these deals represent just 19% of the market overall, up slightly from 17% a year ago, while product choice as a whole for residential mortgages has expanded to its highest count since October 2007.

“The Government has been adamant that they want lenders to do more to boost UK growth, so a rise in mortgage choice is positive.

“However, it may be a bit too soon to celebrate, as affordability remains a critical hurdle for buyers, and those who want to secure their repayments for the next five years will find higher LTVs are only dropping by miniscule margins.”

Ms Springall said: “First-time buyers may feel it’s not quite the right time to get a mortgage if they are struggling with the cost of living. However, lenders have been relaxing their stress testing over recent weeks by boosting loan-to-income multiples, so some buyers might be surprised to find they could now get their first foot on to the property ladder.

“Affordable housing remains a key issue, so there is always more room to help first-time buyers, who remain the lifeblood of the mortgage market.”

Mary-Lou Press, president of NAEA (National Association of Estate Agents) Propertymark, said: “Now that stamp duty has risen across England and Northern Ireland, this is likely making it even more difficult to access better mortgage products due to further financial constraints.

“It also has the potential to distort the housing market, often stopping people from moving when they want to.”

In a helping hand to first-time buyers, Newcastle Building Society launched a £5,000 deposit mortgage on September 5.

The “first step” mortgage offers a maximum loan of £350,000.

Ben Smith, head of commercial and product development at Newcastle Building Society, said: “First-time buyers continue to face real challenges to getting that first foot on the property ladder – with rising house prices, higher rental costs, and the cost of living making it harder than ever for people to save for a deposit.”