Things are on the up for borrowers with a smaller deposit. The financial information website Moneyfacts publishes a regular update on mortgage product numbers, and it provides a useful insight into trends in the market. The latest edition was particularly noteworthy in my view, given the data on the number of high LTV mortgages available.
The Moneyfacts analysis found that, at the start of February 2025, there were 388 mortgages available at up to 95% LTV. That’s the highest level since March 2020, so a really significant improvement when it comes to delivering options for borrowers with the most modest of deposits.
It’s also a useful contrast from the number of mortgages available at other LTV points. 90% deals rose by just one over the month, from 759 to 760, while there was actually a drop in the number of deals available up to 60% LTV.
Looking at availability more generally, overall choice dropped too, with a total of 6,451 mortgages on the market at the start of the month.
SLIM PICKINGS
While it’s clearly encouraging to see any improvement in the number of options open to borrowers with small deposits, it’s impossible to ignore the fact that choice remains incredibly limited.
In percentage terms, just 6% of the mortgages on the market are open to those with a 5% deposit. Obviously we don’t want to see lenders handing out high LTV deals to those who will struggle to repay them, certainly after the improvements in lender responsibility seen since the financial crisis.
But if we had more lenders competing in this space, and delivering high LTV mortgages as we do at Atom bank, then prospective purchasers should be better positioned for accessing the housing ladder.
That’s why it’s encouraging to see talk of a potential loosening of the rules around high LTV lending, to encourage more lenders to enter this space. If the current rules are overly cautious and hold back responsible lending to a growing number of people locked out of the market, then it’s time to review them.
HOUSE PRICE GROWTH IS HOLDING BACK BUYERS
One of the big factors behind the need for more low deposit options is the continued strength of house price growth.
In the year to November 2024, data from the Office for National Statistics (ONS) shows that house prices grew by 3.3%, the highest level in some time. That persistent growth just keeps pushing up the sums would-be buyers need to save to cover the deposit, and there is little sign of that growth coming to a halt any time soon. The imbalance between the supply of homes on the market and the demand from potential buyers keeps pushing house prices to new highs.
Exacerbating the problem is how hard it can be for those buyers to save a sufficient deposit. If they rent, then they have likely seen their rental outgoings jump markedly – the ONS reckons by 9.1% in the year to November 2024 – while other bills have also risen noticeably.
SUPPORT FOR SAVERS
Politicians are currently taking a keen interest in the process of saving for a deposit, and specifically the potential limitations of the Lifetime ISA.
The Treasury Select Committee has begun a probe into the savings vehicle, questioning whether it is fit for purpose, and it’s an issue worth exploring. While the prospect of receiving up to £1,000 a year from the Government to supplement the savings balance will be attractive to plenty of hopeful buyers, the limitations of the Lifetime ISA are becoming ever clearer.
For example, the fact that the cap for the value of properties which can be bought using the proceeds from a Lifetime ISA has not been increased at all since 2017 is concerning. This has been a period of consistent house price growth, and as a result swathes of the country – particularly in London and the South East – are essentially out of the question for Lifetime ISA savers.
As a bank that is known for offering better value savings products than the high street, we know better than most how impactful a genuinely rewarding savings account can be. Adapting the Lifetime ISA to better meet the needs of today’s first-time buyers makes sense.
However, there is only so much that the Lifetime ISA can do, even if it is significantly improved. If lenders are serious about supporting first-time buyers then they need to step up and start offering greater numbers of high LTV products. Until they do, many aspiring buyers will continue to struggle.
