Specialist lender Hodge says deposit size, not just interest rates, will remain one of the biggest factors impacting long-term financial wellbeing.
It says that buyers with 5% deposits are still facing significantly higher rates than those with 15–25%, deepening the affordability gap; and as average first-time buyer deposit now exceeds £60,000, many without family support or long-term savings will still be priced out; and finally hundreds of thousands of borrowers will come off ultra-low fixed-rate deals this year, some still facing jumps of £300–£500 per month despite the recent base rate cut.
As part of its latest message to homeowners, Hodge is encouraging early financial planning and broker engagement to help mitigate risk and enable more flexible, tailored borrowing decisions.
Emma Graham, business development director at Hodge, says: “A recent announcement from the Prudential Regulation Authority shows that positive steps are being taken to address the issues around affordability and help first time buyers. However, with rates still considerably higher than they were three years ago, the impact of a small deposit is more pronounced than ever.
“Affordability has worsened for first time buyers, making deposit size even more important for those looking to get onto the property ladder. Choosing a mortgage today isn’t just about finding the lowest rate, it’s about finding a product that supports your specific circumstances, especially in an economic environment where everything from energy bills to grocery costs has gone up.
“If you have a smaller deposit, it’s even more important to get the structure of your mortgage right from the outset.”
“This year, hundreds of thousands of borrowers are expected to exit fixed-rate deals secured during the ultra-low-rate era of 2020–2022. As these borrowers face much higher interest rates, many could see their repayments jump by £300–£500 a month.
“Whether you’ve gained equity, increased your income or had a change in life circumstances, there may be more options than you think, but the key is acting early and being open to exploring the right type of mortgage for your situation, not just defaulting to what’s most familiar.”
Hodge reiterates that in today’s shifting mortgage landscape, understanding the role of your deposit has never been more important. Whether you’re stepping onto the property ladder or looking to remortgage, taking time to explore your options, obtaining whole market advice from a broker and assessing how your deposit impacts your deal could be key to protecting your long-term financial wellbeing.
