The number of mortgages available for buyers with smaller deposits has hit its highest point in 17 years, according to new market analysis. The data highlights a noticeable shift in lending options, offering greater choice to those who may only be able to save a modest deposit.
Moneyfacts, a financial information provider, reported that in September there were 1,360 mortgage products requiring deposits of either 5% or 10%. This is the largest selection recorded since March 2008, when 1,532 similar products were available, reflecting a significant milestone in the housing finance market.
Currently, these low-deposit mortgages account for around 19% of the overall homeowner mortgage market. This means that nearly one in five deals now cater to borrowers who cannot afford a larger upfront sum, signalling a gradual shift towards inclusivity in lending.
For first-time buyers, who are often most affected by affordability challenges, this increase in low-deposit options could be a vital step towards achieving homeownership. Many struggle to save for a 15% or 20% deposit while also dealing with rising rents and everyday living costs.
The research also revealed that mortgage products are available for shorter periods before being withdrawn or replaced. The average “shelf life” of a mortgage deal in September stood at just 17 days, compared with 21 days a year earlier, showing how quickly the market is moving.
Rachel Springall, finance expert at Moneyfacts, explained that borrowers with just 5% or 10% equity now have access to the widest range of high loan-to-value (LTV) deals in almost two decades. However, she stressed that while this growth is positive, such products still represent less than a fifth of the market overall.
Springall also noted that residential mortgage choice in general has grown significantly, reaching its highest point since October 2007. This expansion is partly in line with the government’s push for lenders to support economic growth, with increased mortgage availability viewed as a positive outcome for both buyers and the wider economy.
Despite this improvement, she cautioned that affordability remains the biggest hurdle. Mortgage rates on higher LTV deals are only falling by very small margins, meaning repayments remain high for many households. For buyers hoping to secure stability with a five-year fixed deal, the savings may not be significant just yet.
For first-time buyers in particular, the decision of whether to purchase now or wait remains difficult. On one hand, lenders have relaxed stress testing in recent weeks, boosting loan-to-income multiples and increasing the amount some buyers can borrow. On the other hand, high living costs make it challenging to commit to a long-term mortgage.
Springall emphasised that affordable housing remains a key issue. Without more support, many aspiring buyers will continue to feel excluded from the housing market. She stressed that first-time buyers play a crucial role in keeping the property market moving, as they are the foundation of the buyer chain.
Additional financial pressures have also been created by recent stamp duty changes. Mary-Lou Press, president of NAEA Propertymark, highlighted that rising stamp duty across England and Northern Ireland has made it even harder for some buyers to access the best mortgage products. She warned that the higher tax burden could discourage people from moving, creating further imbalances in the housing market.
In an effort to address some of these challenges, certain lenders have started to introduce new products aimed at easing the path for buyers. One recent example came from Newcastle Building Society, which launched a mortgage designed to help those struggling to save a large deposit.
The “first step” mortgage, introduced on 5 September, requires just a £5,000 deposit. It allows borrowers to take out loans of up to £350,000, giving many first-time buyers a realistic chance of securing a home despite rising property prices.
Ben Smith, head of commercial and product development at Newcastle Building Society, said the mortgage was created in direct response to the difficulties faced by first-time buyers. He pointed to soaring house prices, increasing rents, and the broader cost of living crisis as major barriers preventing people from saving enough for a deposit.
While the expansion of low-deposit deals and the introduction of innovative products offer fresh opportunities, challenges remain. For many, affordability is still the deciding factor, and until wider cost-of-living pressures ease, the journey to homeownership will continue to be difficult for a significant number of buyers.
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