While higher loan-to-value (LTV) mortgages dominate first-time buyer demand, many are nonetheless seeking sub-60% LTV deals, says Moneyfacts.

Of those looking for fixed term deals on moneyfactscompare.co.uk:

• Almost one in three (31%) first-time buyers are opting for 90% LTV mortgages, and a further 10% are looking at 95% LTV options. This hints at many first-time buyers relying on 5-10% deposits. This translates to £13,650 to £27,300 at the average UK house price of £272,995;

• Almost one in five (17%) first-time buyers are seeking mortgages with maximum 60% LTVs. For context, a 40% deposit on the average UK house price would require a deposit of around £110,000, highlighting that there is a distinct group of first-time buyers in a favourable financial position;

• Borrowers with smaller deposits, or those who have accumulated less equity, could be paying £134 more per month more compared to those with a larger deposit or equity to borrow the same amount;

• Homeowners with around 25%equity are m ore likely to make their next next move on the housing ladder, with this threshold potentially acting as a key financial or psychological milestone before progressing to a new property.

A Moneyfactscompare spokesperson says: “First-time buyers in particular are feeling the weight of affordability pressures, with many relying on more expensive high LTV loans due to the challenges of raising a sizeable deposit. 

“Meanwhile, more established homeowners who have accumulated greater equity, are in a better position to benefit from lower LTVs and more competitive mortgage rates.

“However, a significant proportion of first-time buyers are seeking mortgages at lower LTVs, suggesting that many are receiving significant financial support from family contributions or inheritance. 

“This marks a growing divide in the housing market as those without additional financial assistance face greater financial strain, particularly as they are more vulnerable to rising rates or potential housing market corrections.”

In response to the Moneyfacts stats, Mary-Lou Press – president of agents’ body Propertymark – comments: “These latest figures shine a light on the growing divide in the first-time buyer market. While some are having to stretch their finances to secure 90% or 95% loan-to-value mortgages, it’s striking that almost one in five new buyers are entering the market with deposits of 40% or more.

“This clearly points to a two-tier system emerging, between those who can access significant family support or inheritance, and those who must rely solely on their own savings in an environment where affordability remains a major hurdle.

“Rising house prices over many years, coupled with high living costs, have made it increasingly difficult for many young people to build a deposit without outside help. Policymakers should ideally prioritise measures that support genuine first-time buyers, including initiatives to increase housing supply, a review of property-related taxes, and the encouragement of mortgage products that promote accessibility without compromising financial stability.

“Without decisive action, homeownership risks becoming even more out of reach for a growing proportion of the population.”