Credit crisis 2.0? Low deposit mortgage lending jumps 40% to £24.7bn
Julian Sampson, of TWM Solicitors, says lenders are currently offering a much broader range of low-deposit mortgage products.
Lending on mortgages with deposits of less than 10% has soared almost 40% in a year, according to new analysis.
The value of these loans climbed 38% to £24.7billion in the year to 30th June 2026, up from £17.9billion the previous year, TMW Solicitors has revealed.
Meanwhile, lending where the deposit is less than 5% of the property value has more than doubled in the same period, up from £720million to £1.5billion.
TMW says the cost of living crisis has made it more difficult for younger buyers to save for a deposit, pushing them towards low-deposit products.
We’re now seeing lenders respond with a much broader range of low-deposit products.”
Lenders have responded with a wider range of options.
Some banks are currently offering 98% mortgages, while several require a deposit of only £5,000.
Other products include family deposit mortgages, where a relative places 10% of the property value into a designated savings account as security, allowing the buyer to purchase with no deposit of their own.
A further option lets buyers of new-build homes purchase with a 5% deposit, with the housebuilder guaranteeing lenders against losses of up to 35% of the property’s value.
The shift comes as the FCA consults on changes to help first-time buyers and other underserved borrowers, having acknowledged that post-financial crisis reforms may have made it harder for some creditworthy consumers to get a mortgage.
Low-deposit mortgages
Julian Sampson, Partner and Head of Lending at TWM Solicitors, (pictured), says: “After several years in which higher interest rates and rising living costs made it increasingly difficult for first-time buyers to save a meaningful deposit, we’re now seeing lenders respond with a much broader range of low-deposit products.”
He adds: “Many buyers who previously found themselves excluded from the market now have more routes into home ownership than they would have had just a few years ago. There is substantial deferred demand for mortgages among young people.”
Sampson urges caution, however, noting that some schemes rely on family members providing security while others are restricted to new-builds or carry eligibility conditions.
He says: “Although low-deposit mortgages can make home ownership possible much sooner, buyers should remember that borrowing a higher proportion of the property’s value usually comes with higher interest rates.
That means monthly repayments may be higher and it can take longer to build equity, increasing the risk of negative equity if house prices fall.”
Despite the growth, lending at these levels remains well below pre-crisis norms. In the quarter to 30 June 2007, 15% of new UK mortgages had a loan-to-value ratio of 90% or more, compared with 8.4% today.
