The return of low-deposit mortgages

Mar 15, 2018


By Kate Brown

In the past year, mortgage providers have allowed applicants to put down deposits of as little as 5%. Figures provided by the financial information service Moneyfacts reported this to be the first time since the 2008 financial crisis that the number of deals allowing applicants to put down a 5% deposit has reached over 300 in the UK. Current statistics show that 307 deals are now on the market, compared to just 253 last year.

A representative from Moneyfacts, Charlotte Nelson, stated that the increased number of deals at this loan-to-value level should improve competition and that this was previously an area of the market that was often neglected. Managing director of Barclays Mortgages, Hannah Bernard, said: “spring is traditionally a period of increased house buying activity and providing competitive rates will enable more first-time buyers and those with smaller deposits to get on, and move up, the property ladder”. For first time buyers looking to purchase a home with a low deposit, the market is looking more positive and whilst a greater range of choice seems appealing, buyers are encouraged not to wait around.

Figures from Nationwide Building Society calculated that first-time buyers would typically save for 2 to 3 years to afford a deposit at this loan-to-value level, however this can vary considerably depending on region and average house prices. Dan Wilson Craw, of the Generation Rent lobby group, said: “high housing costs are eating into renter’s take-home pay which makes saving for a deposit difficult in the country as a whole but near impossible in London and the South East of England.”

However, government initiatives such as the Help to Buy ISA can support first time buyers save for a deposit. The scheme allows for prospective buyers to gain a maximum bonus of £3000 for a deposit by saving £200 a month into a tax-free savings account. The Help to Buy ISA has been available since 2015 and they have already helped more than 320,000 people secure their own home.

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