10/10/2026
Small-deposit mortgages are making a comeback: High-LTV lending hits its highest share since 2008
Struggling to save a huge deposit for your first home? New figures show mortgages for buyers with smaller deposits are accounting for a bigger share of lending. But a 5% deposit does not necessarily mean buying will be affordable, so here is what first-time buyers need to know.
For many aspiring homeowners, it is not the monthly mortgage payment that first stops them in their tracks. It is the deposit.
Saving tens of thousands of pounds while paying rent and everyday living costs can make buying a first home feel frustratingly distant.
But there is some encouraging news for those who have been struggling to build a large deposit.
The latest Bank of England mortgage lending figures show that 8.4% of gross mortgage advances in the second quarter of 2026 were made at loan-to-value ratios above 90%1.
That is the highest share since the second quarter of 20081.
It is also up from 8% in the first three months of this year and 7% a year earlier1.
In simple terms, mortgages involving relatively small deposits are playing a bigger role in the market than they have for many years.
For first-time buyers who assumed they would need a substantial deposit before home ownership was even worth considering, that makes this an interesting development.
But there is an important distinction.
The 8.4% figure covers gross mortgage advances across the market. It is not a figure for first-time buyers alone.
So what does it actually tell us, and could a smaller deposit make buying a home more achievable?
What does ‘high LTV’ actually mean?
LTV stands for loan-to-value. It measures the mortgage as a percentage of the property’s value.
If a buyer has a 10% deposit and borrows the remaining 90%, that would ordinarily be described as a 90% LTV mortgage.
A buyer putting down 5% and borrowing 95% would ordinarily require a 95% LTV mortgage.
The latest Bank of England data show lending above 90% LTV has become significantly more prominent.
Within the overall figures, mortgages above 95% LTV remained a much smaller part of the market, accounting for 0.5% of gross advances in the second quarter1.
That distinction matters. The figures do not suggest lenders are abandoning deposits altogether. They show that lending where borrowers have comparatively little equity is accounting for a larger proportion of mortgage business.
Why this could matter to first-time buyers
The deposit remains one of the most formidable barriers facing people trying to buy their first home.
The latest English Housing Survey found that recent first-time buyers in England had a median deposit of £36,500 in 2024-252.
The mean, or average, was much higher at £78,131, partly reflecting buyers with particularly large deposits2. The survey defines recent first-time buyers as households that bought their first main home during the previous three years.
There is another revealing figure.
Around 59% of recent first-time buyers in the survey put down less than 20% of their property’s purchase price, including 16% who provided a deposit of between 1% and 9%2.
In other words, buying a first home does not always require the enormous deposit that prospective buyers may imagine.
That does not mean everybody with a 5% or 10% deposit will qualify for a mortgage. But it does mean it can be worth establishing what is actually possible before assuming the size of your deposit automatically rules you out.
Government support for 5% deposit mortgages is now permanent
There has also been a significant change behind the scenes.
Since July 2025, the Government has operated a permanent Mortgage Guarantee Scheme, designed to support the availability of mortgages between 91% and 95% LTV3.
HM Treasury says the scheme can enable eligible first-time buyers and home movers across the UK to purchase a property with a deposit as small as 5%3.
The scheme works by giving participating lenders a government-backed guarantee against a portion of potential losses on qualifying mortgages3.
Crucially, however, this is a guarantee to the lender, not a promise to the borrower that their mortgage application will be accepted3.
Borrowers still need to meet the lender’s individual criteria and affordability assessment3.
Nor does every mortgage between 90% and 95% LTV necessarily have to be offered through the Government scheme.
First-time buyers remain a big part of mortgage lending
First-time buyers themselves continue to represent a substantial part of the mortgage market.
FCA data show that first-time buyers accounted for 27.3% of total gross mortgage advances in the second quarter of 20264.
Home movers accounted for a further 28.8%4.
That does not mean conditions have suddenly become easy for new buyers.
Affordability remains a major hurdle, and having enough cash for a deposit is only one part of the equation.
But the rise in high-LTV lending is evidence that borrowers with smaller deposits have not disappeared from the mortgage market.
The catch with borrowing 95%
A small deposit can get you to the starting line sooner, but there are trade-offs.
The first is straightforward: the more of the property price you borrow, the larger your mortgage debt will be.
Mortgage pricing can also vary significantly according to LTV. The rate available to somebody borrowing 95% of a property’s value may be different from the rate available to a borrower with considerably more equity.
This is why focusing only on the minimum deposit can be misleading.
If you already have close to a larger deposit, it can be useful to understand whether putting down more could alter the mortgage options available.
Conversely, if raising another substantial sum would take several years, it may be worth finding out what options currently exist with the deposit you already have.
Neither route is automatically right.
Small deposits also leave less room if property prices fall
Buyers also need to think about equity.
If you purchase a property with only a small deposit, you begin with relatively little equity of your own.
Should the property’s value subsequently fall, that equity can be reduced quickly.
In some circumstances the mortgage outstanding could become greater than the property’s market value, commonly known as negative equity.
This can make selling or remortgaging more difficult.
It is therefore important not to interpret the increased availability and use of high-LTV mortgages as meaning that borrowing as much as possible is necessarily sensible.
A mortgage needs to be affordable not just on completion day, but throughout the period you expect to hold it.
A 5% deposit does not mean a lender will lend you the other 95%
This is perhaps the most important point.
The existence of a 95% LTV mortgage does not mean somebody with a 5% deposit automatically qualifies.
Mortgage lenders are required to assess whether a borrower can afford to repay the money being borrowed5.
The FCA’s responsible lending rules require firms to consider whether a customer will be able to repay the sums borrowed and the interest due5.
Income, regular expenditure and existing borrowing can therefore all influence affordability.
Individual lender criteria can also differ.
Your employment circumstances, credit history, the type of property you are purchasing and other elements of the application may affect the mortgages available.
This is why two first-time buyers with identical deposits and looking at similarly priced homes could potentially have very different borrowing options.
Longer mortgage terms are already becoming more common
There is another sign of how first-time buyers are adapting to affordability pressures.
The English Housing Survey found that 62% of recent first-time buyers with mortgages had taken repayment terms of 30 years or more in 2024-252.
Five years earlier, in 2019-20, the proportion was 47%2.
A longer term can reduce the initial monthly repayment on a repayment mortgage, all else being equal, but it also generally means paying interest for longer and potentially paying more interest overall.
It should therefore be considered as part of the overall cost and suitability of the mortgage, rather than simply as a way to achieve a lower monthly figure.
So, should you buy with a 5% deposit?
There is no universal answer.
For one buyer, purchasing with a smaller deposit may be appropriate because their income comfortably supports the mortgage and waiting several more years to build a larger deposit does not suit their circumstances.
For somebody else, continuing to save could increase their equity, reduce the amount they need to borrow and potentially change the mortgage products available to them.
What the latest figures do suggest is that a small deposit should not automatically be treated as the end of the conversation.
High-LTV mortgages are accounting for their largest share of gross advances since 2008, and permanent government support is in place for the 91% to 95% LTV part of the market1.
If buying your first home is something you are considering, finding out what you may realistically be able to borrow can be a sensible starting point.
As mortgage brokers, we can look at your deposit, income, commitments and circumstances and explain the mortgage options that may be available to you.
That can also help you understand whether using your current deposit or continuing to save could make a meaningful difference to your options.
Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
There may be a fee for mortgage advice. The precise amount of the fee will depend on your circumstances.
Think carefully before securing other debts against your home/property.
All the information in this article is correct as of the publish date 24th September 2026. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content, and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.
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Sources
Bank of England. (2026) Mortgage Lenders and Administrators Statistics: 2026 Q2. [online] Available at: https://www.bankofengland.co.uk/statistics/mortgage-lenders-and-administrators/2026/2026-q2 [Accessed 22 September 2026].
Ministry of Housing, Communities and Local Government. (2026) English Housing Survey 2024 to 2025: Chapter 2, Housing costs and affordability. [online] GOV.UK. Available at: https://www.gov.uk/government/statistics/chapters-for-english-housing-survey-2024-to-2025-headline-findings-on-demographics-and-household-resilience/chapter-2-housing-costs-and-affordability [Accessed 22 September 2026].
HM Treasury. (2025) 2025 Mortgage Guarantee Scheme. [online] GOV.UK. Available at: https://www.gov.uk/government/publications/2025-mortgage-guarantee-scheme [Accessed 22 September 2026].
Financial Conduct Authority. (2026) Commentary on Mortgage Lending Statistics Q2 2026. [online] Available at: https://www.fca.org.uk/data/commentary-mortgage-lending-statistics-q2-2026 [Accessed 22 September 2026].
Financial Conduct Authority. (2026) MCOB 11: Responsible lending. [online] FCA Handbook. Available at: https://handbook.fca.org.uk/handbook/mcob11 [Accessed 22 September 2026].
