New data from Moneyfactscompare.co.uk revealed that while high loan-to-value (LTV) mortgages remain the most common choice among first-time buyers (FTBs), a notable proportion are searching for deals at the opposite end of the scale.
The analysis of users comparing fixed-term mortgage deals on the site revealed that 31% of first-time buyers are looking at 90% LTV products, and a further 10% are exploring 95% LTV options.
This suggests many buyers are entering the market with deposits of around 5% to 10%, equivalent to £13,650 to £27,300 based on the current average UK house price of £272,995.
However, the data also revealed that 17% of first-time buyers are searching for mortgages with a maximum 60% LTV, implying deposits of around 40%, or roughly £110,000.
The research highlighted a growing divide in affordability.
Borrowers with smaller deposits could be paying £134 more per month than those with greater equity, based on average fixed mortgage rates.
Meanwhile, buyers moving up the housing ladder are more likely to act once they have around 25% equity.
Adam French, head of news at Moneyfactscompare.co.uk, said: “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.”
