3 Dec 2020

Mortgages for first-time buyers slowly returning


Things are starting to look up for those with a small deposit, as some mortgage lenders are showing renewed appetite.

Home loans for those with a small deposit are typically for first-time buyers, and are therefore viewed as a vital part of the market.

Indeed, in October it was reported that Prime Minister Boris Johnson was thinking of launching a new scheme to help first-time buyers purchase a property with a 5% deposit in future.

However, there are still question marks over the state of the economy, leading to some renewed caution from the UK’s mortgage lenders.

The positives

Nationwide Building Society – one of few major lenders operating in this market – has expanded the availability of its 90% loan-to-value range.

The society has lent to those with a 10% deposit since July but with restrictions, as it only allowed gifted money to make up 25% of deposits. That restriction has now been removed.

At the end of November Yorkshire Building Society also launched a fresh range of 90% LTV mortgages, including a 2-year fix at 3.69% and a 5-year fix at 3.79%.

Aside from these examples, there are broadly more options for people who want a 10% deposit than there were.

Data from shows that there were 81 deals at 90% LTV on the 30th November, up from just 56 on the 1st November.

With more competition comes cheaper products, as the cost of a 90% LTV 5-year fix fell from 3.98% on the 1st November to 3.82% at the end of the month.

The negatives

Yes, things are bouncing back, but they’re still a long way from returning to normal.

Before the pandemic almost every lender was competing in this space, as there were 779 products available with an LTV above 90% in March, according to

What’s holding things back? According to lenders the number of existing customers calling to get a mortgage payment holiday isn’t helping.

As you might imagine, if more of their customers take out a payment holiday then lenders will have less money coming in, which limits their appetite to take on new business.

Seeing as mortgage payment holidays have been extended until July next year, this issue is going to continue for some time.

Economic caution

There’s also caution about the state of the economy.

In Nationwide’s latest house price index its economist Robert Gardner was very sober about the state of play. 

He said economic growth is shrinking and labour market conditions are weakening.

He also raised concerns about the possible ill effects of the end of the stamp duty holiday on the 31st March 2021.

There’s still time for the government to change the deadline, but as it stands housing activity could fall sharply after March.


As housing professionals we tend to talk up the value of getting on the ladder, seeing as house prices tend to rise in the long term.

However, if you’re looking to buy with a 5-10% deposit there are currently tricky market conditions to contend with.

While things are bouncing back, there’s generally still a lack of products above 90% LTV.

Meanwhile the stamp duty holiday has made things harder for first-time buyers by driving up competition and house prices.

Despite the weak state of the economy Nationwide reports that annual house price growth rose to a 5-year high of 6.5% in November – which doesn’t seem sustainable.

What’s more, Bank of England data shows that mortgage approvals reached a 13-year high in October.

Thirdly, if you’re looking to buy now you may not even be able to profit from the stamp duty change, because it’s taking months for transactions to go through at the moment.

With all this in mind, it might be worth waiting it out for a few months. 

Whatever you decide however, we’d recommend you speak to us, who can guide you through the best options for your circumstances as the market continues to evolve.

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