First-time buyers (FTBs) leaned more on bigger mortgages as high rents wiped out their ability to save for deposits, analysis of UK Finance data by HouzeCheck found.
In England, the average loan-to-value (LTV) on a FTB mortgage went up from 74.7% in Q1 2024 to 77.1% in Q1 2025.
In Scotland, the average rose from 81.0% to 82.4%, the highest in any UK nation or English region.
Richard Sexton, commercial director of HouzeCheck, said: “The days of massive equity cushions are over – and they are unlikely to return anytime soon.
“First-time buyers are borrowing more to finance property purchases. Some would argue that it’s a sign of confidence in the market.
“I don’t think that’s the case: it’s a sign that potential first-time buyers living in rented accommodation can no longer save for deposits.”
Sexton added: “As landlords have left the market in the face of unhelpful regulation, the supply of rented property has shrunk, and rents have risen.
“There’s no sense that first-time buyers have hit a ceiling in how much they can stretch, either – look at the increasing number of zero deposit mortgages available now.
“The average LTV for a new first-time buyer mortgage in Scotland is high, even compared to London. And it’s still rising.”
He said: “The problem is that buyers in Scotland haven’t been in a position to save for decent deposits for longer because the landlord exodus started earlier there.
“Housing is a devolved matter and anti-landlord legislation started earlier north of the border nudging up rents, limiting tenants’ ability to tuck money away.
“First-time buyers in Scotland are increasingly turning to high LTV mortgages to get a foothold on the property ladder.”
He added: “Zero deposit mortgages may lower the barrier to entry today, but they leave borrowers exposed to downturns in house prices.
“With no equity buffer, or just a thin one, negative equity becomes a real risk — especially if the market softens or economic conditions tighten unexpectedly.
“What’s more, high LTV borrowers often face higher interest rates, larger fees, and elevated monthly repayments.”
He said: “Income shocks, such as job losses or rising living costs, could quickly push borrowers on stretched budgets to breaking point.
“In an environment where inflation remains unpredictable and the job market is softening very rapidly, first-time buyers may find themselves trapped in costly deals they can’t easily refinance their way out of.”
LTVs rose fastest in East Anglia, from 73.6% to 76.2%, in the South East, from 74.0% to 77.3%, and in Greater London, from 67.1% to 72.0%.
Sexton said: “Critically, if high LTV borrowing becomes the new normal, it risks increasing systemic risk across the housing market.
“We need to bear that in mind in England, where there’s some very misguided landlord legislation on the horizon.
“A generation of buyers taking on maximum leverage to buy homes when prices are by no means rising could create a house of cards — one that lenders, regulators, and the wider economy may ultimately have to reckon with.”
He added: “Responsible lending and robust affordability testing are now more vital than ever to prevent enthusiasm from tipping into overextension.
“This is a trend the mortgage industry needs to keep an eye on.”
