The first-time buyer profile is changing. Increasingly, buyers are entering the market with larger deposits than at any point in recent years as many try to bridge the gap between borrowing limits and property prices to keep their costs down.
For mortgage brokers and lenders, this shift raises important questions about risk, product design, and what the future shape of demand means for the wider market.
THE CHANGING DEMOGRAPHIC OF THE FIRST TIME BUYER
The average UK house price recently passed £300,000 for the first time and reached around £301,151 in early 2026. A figure widely reported a new record high. This is creating an imbalance between income growth and affordability which means that aspiring first time buyers either have to wait till their earnings increase or need to prioritise putting larger deposits upfront to get a foot on the ladder.
Building up enough funds for a viable deposit often involves years of disciplined saving. Even for couples purchasing together, it’s a significant amount to reach. Increasingly, we see deposits being facilitated by intergenerational support, in the form of the ‘bank of mum and dad’. Family gifting or early inheritance are enabling many first time buyers to purchase properties that would otherwise be unviable.
The current economic environment doesn’t make it easy for first time buyers. The increasing cost of living puts pressure on the ability to save. Even with a healthy deposit, that alone isn’t enough with buyers having to then consider stamp duty and legal costs on top of the price. What this means is that the first-time buyer home is no longer what it used to be. Many are looking for larger properties that they can grow into, rather than needing to move and footing these costs again in the not-too-distant future.
BORROWING BEHAVIOURAL SHIFTS
Beyond simply bridging the affordability gap, larger deposits are increasingly being driven by a more cautious and considered borrower mindset. With higher interest rates, cost of living pressures and ongoing economic uncertainty, many buyers are looking for ways that will reduce their financial exposure rather than stretching themselves to the limit.
A lower loan-to-value (LTV) ratio plays a central role in this shift. The more equity a borrower can put into a purchase upfront, the less risk they present to lenders. This is typically rewarded with access to more competitive mortgage rates.
Lower LTV borrowing can significantly reduce monthly repayments, easing pressure on day-to-day finances and improving overall affordability. For many first-time buyers this creates a greater sense of security and control, allowing them to manage rising living costs with more confidence.
For brokers it is not about how much a client can borrow, but how much they should borrow and how their deposit strategy can support that decision. Personalised advice has never been so important with a greater need to understand our clients circumstances now and how they see the future.
THE CHANGING LANDSCAPE FOR LENDERS
For lenders, the move towards lower LTV borrowing presents both opportunities and challenges. Higher deposits normally mean reduces credit risk. Borrowers with more equity are typically more financially stable and less likely to default on payments.
Lenders also need to bear in mind that this is a trend which may contribute to a reduction in transaction volumes at the lower end of the market. If fewer buyers are able to meet the needs of higher deposits and affordability criteria, the pool of eligible first-time buyers decreases. This has a knock-on effect for overall market liquidity.
To remain competitive, lenders need to adapt their products with an increased emphasis on innovation within lower-LTV ranges. Offering enhanced rate competition, more flexible features, and tailored products for buyers with strong deposits could help lenders differentiate.
Lenders must also look at innovative ways to support those with lower deposits get on to the property ladder. This might include the use of guarantor mortgages, family-assisted products, or more flexible underwriting approaches that take a holistic view of borrower circumstances.
The rise of larger deposits among first-time buyers reflects the increasing pressures of the housing market, and what this means for the future of homeownership. For lenders and brokers, the challenge is to navigate this complexity to be able support the diverse range of those in the market.
For brokers, the evolving landscape futher underpins the importance of nuanced advice. We need to ensure we understand not just the products available, but the broader financial context of each client, including family support, long-term goals, and risk appetite. This will be critical in enabling us to deliver long-term value.
