The share of UK mortgages with deposits worth less than 10% of a property's value is currently the highest it has been since 2008, according to the Bank of England. This trend comes as lenders introduce new deals, some covering up to 100% of a property's value, to help first-time buyers.
Lenders like Lloyds, Santander, Skipton, and Yorkshire Building Society have launched various mortgage products over recent years, with some offering upwards of 95% loan-to-value. These deals aim to support first-time buyers in getting onto the housing ladder, particularly as property prices continue to rise and saving for a deposit remains challenging.
Conroy, 32, and Amber, 28, used Skipton Building Society's Track Record mortgage, which covers 100% of a property's value, to buy a four-bedroom home in Swinton for £242,000 in August. They secured a five-year fixed interest rate of 5.33%. Similarly, Bronya, 27, and George, 29, purchased a four-bedroom house in Rhuddlan, North Wales, in August with a £5,000 deposit, representing approximately 98% of the property's value from Lloyds.
While these low-deposit loans can help buyers, they typically come with higher interest rates and specific eligibility criteria. For example, Skipton's zero-deposit mortgage requires borrowers to prove consistent rent payments for at least 12 months and credit payments for six months. Experts advise borrowers to consider the risks, such as negative equity, where the property's value falls below the outstanding loan.