Increase follows continued cost-of-living crisis

Low deposit lending (of less than 10% of a property’s value) increased by more than a third (38%) to £24.7bn in the year to 30 June 2026, up from £17.9bn the previous year, according to analysis by TWM Solicitors.

Of that, the number of new mortgages with a deposit of less than 5% doubled to £1.5bn, up from £720m (a 100.4% increase).

The shift comes as the cost-of-living crisis continues to add pressure to those trying to save for a deposit, and as lenders widen their ranges to include more low-deposit products.

Julian Sampson, partner and head of lending at TWM Solicitors, said: “After several years in which higher interest rates and rising living costs made it increasingly difficult for first-time buyers to save a meaningful deposit, we’re now seeing lenders respond with a much broader range of low-deposit products.”

The FCA recently launched a consultation on changes to help first-time buyers and other unserved borrowers access mortgages more easily and Sampson said lenders had responded by creating more innovative mortgage products.

“Many buyers who previously found themselves excluded from the market now have more routes into home ownership than they would have had just a few years ago,” he said.

A market ‘bubbling with intent’

“What is rewarding are the number of conversations we are having with lenders’ product teams who are taking active decisions to structure their mortgage products with this one aim in mind. The consumer lending market is bubbling with intent.”

 Some large retail banks are offering mortgages covering up to 98% of the house price while others require a deposit of just £5,000.

Low-deposit mortgages were popular before the Global Financial Crisis. In the quarter to 30 June 2007, 15% of new mortgages in the UK had an LTV (loan-to-value) ratio of 90% or more of the property price, versus 8.4% today.

However, Sampson warned that buyers must take into account the higher interest rates involved. “Although low-deposit mortgages can make home ownership possible much sooner, buyers should remember that borrowing a higher proportion of the property’s value usually comes with higher interest rates. That means monthly repayments may be higher and it can take longer to build equity, increasing the risk of negative equity if house prices fall.”