A “significant minority” of first-time buyers are seeking mortgage deals at 60% loan-to-value (LTV) or lower, according to Moneyfacts.

Despite higher LTV mortgages dominating first-time buyer demand, Moneyfacts analysis showed that 17% of 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.

Moneyfacts estimated that 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.

By comparison to those looking at 60% LTV deals, 31% of first-time buyers are opting for 90% LTV mortgages, while a further 10% are looking at 95% LTV options, hinting that a much larger number of first-time buyers are still relying on 5-10% deposits.

Head of news at Moneyfacts, Adam French, said: “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.”

President of NAEA Propertymark, Mary-Lou Press, added: “While some are having to stretch their finances to secure 90% or 95% LTV mortgages, it’s striking that almost one in five new buyers are entering the market with deposits of 40% or more,” she said.

“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.

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

---