First-time buyers leaning harder on high LTV loans as soaring rents wipe out deposit savings
03 July 2025
- Scotland’s first-time buyers most highly leveraged
First-time buyers (FTBs) are leaning harder on high loan to value (LTV) mortgages, according to new analysis of UK Finance data undertaken by HouzeCheck.
The digital-first surveying portal says the latest regional mortgage market data from UK Finance reveals a subtle but telling shift in how FTBs are financing their home purchases.
In Q1 2024, the average LTV on a new FTB mortgage in England was 74.7 per cent. By Q1 2025, that had risen to 77.1 per cent, a 2.4 percentage point increase.
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. 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.”
Average LTVs on new FTB mortgages are much higher in Scotland, where they rose from 81.0 per cent in Q1 2024 to 82.4 per cent in Q1 2025. Average new FTB LTVs are higher in Scotland than among any of the home nations or any English region.
Richard Sexton said: “The average LTV for a new first-time buyer mortgage in Scotland is high, even compared to London. And it’s still rising. 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. 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. 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.”
While new FTB loans in Scotland have the highest LTVs in the UK, average LTVs for FTBs are rising fastest in East Anglia (up from 73.6 per cent in Q1 2024 to 76.2 per cent in Q1 2025), the South East (up from 74.0 per cent to 77.3 per cent), and in Greater London (from 67.1 per cent to 72.0 per cent).
Richard 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. 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.”
LTVs for home movers in England are moving in the same direction. The LTV on a new mortgage for the average home mover has now risen to 64.9 per cent (Q1 2025) from 63.1 per cent in Q1 2024. This marks a 1.8 percentage point increase year-on-year.
