It’s often said that first-time buyers are the engine room of the UK housing market, and their ability to purchase has a direct impact on overall transaction levels and market liquidity. For lenders, they also represent an incredibly important segment—typically loyal, long-term customers, often with growing financial needs. Does it get better than that?
But as we move deeper into 2025, the obstacles facing these buyers continue to present issues, and if lenders want to protect their pipeline and maintain volumes, it's critical we continue to find new, responsible ways to support this group.
Affordability pressures remain intense. While interest rates may have stabilised, the average deposit size continues to be a significant barrier to entry—particularly in higher-value markets.
The recent changes to Stamp Duty Land Tax, which came into force on 1st April, have also increased the cost of purchase for all buyers, including first-timers. With many fearing this will reduce demand and stifle activity, the role of lenders in offering high LTV solutions becomes even more important.
We’ve already seen positive developments. The availability of 95% LTV mortgages has reached a near five-year high, with over 380 products now on the market, according to Moneyfacts.
Meanwhile, Skipton Building Society’s launch of its 100% LTV ‘Track Record’ mortgage - targeted at long-term renters with solid payment histories - has demonstrated how lenders can innovate while keeping credit risk in check. These types of initiatives are encouraging, particularly when they’re backed by rigorous affordability assessments and data-driven underwriting.
On that very point, we have supported Hanley Economic Building Society via our private mortgage insurance product with its new ST Rent To Own Mortgage. It offers a 100% mortgage to local renters who have an ST postcode, allowing them to use their 12-month rental history in order to purchase a home locally. Another really strong example of how lenders can use a risk-mitigant such as insurance in order to offer its customers access onto the property ladder by high LTV mortgages.
That said, the return of 100% LTV products has attracted criticism from some quarters of the media, often harking back to the excesses of the pre-2008 era.
It’s a familiar narrative - negative equity, unsustainable lending, risk to financial stability – but was it really true at the time, and it certainly doesn’t reflect the maturity of the current market or the safeguards that responsible lenders already have in place. Plus, as can be seen from the Hanely Economic example above, lenders are putting credit risk mitigants in place as well.
Nor does it acknowledge the necessity of high LTV lending for thousands of would-be buyers who simply cannot save the size of deposit now required.
There is, however, the potential for significant change in this area. The Bank of England and Financial Policy Committee are currently consulting on the long-standing restriction which limits lenders to issuing no more than 15% of new mortgages at over 4.5 times income.
In today’s market, where wages have not kept pace with house prices in many parts of the country, that rule has become increasingly blunt and restrictive. A more flexible approach to LTI caps could allow lenders to do more for creditworthy first-time buyers who fall just outside the current thresholds. Some estimates suggest that up to 76,000 more FTBs could access homeownership if the cap were lifted or adjusted.
But greater flexibility on income multiples cannot and should not mean greater risk. This is where the use of private mortgage insurance (PMI) becomes so critical.
For lenders looking to push into the higher LTV space - or expand their appetite for loans above 4.5x income – private mortgage insurance provides a credible, tried-and-tested way to mitigate credit risk. It protects the lender’s balance sheet in the event of default and loss, supports capital efficiency, and offers reassurance to stakeholders, including regulators.
Private mortgage insurance also gives lenders optionality. With the right insurance in place, you can confidently develop high LTV propositions that serve under-served borrower segments, like first-time buyers, without stretching risk tolerances.
You can structure products to reflect affordability realities, not just deposit constraints. And you can meet the demand that undoubtedly exists without exposing the business to volatility if market conditions change.
In an environment where affordability is stretched and regulatory reform is imminent, lenders have a real opportunity to lead. By pairing high LTV products with robust affordability checks and private mortgage insurance, you can be part of the solution - supporting the long-term health of the market while also growing your lending volumes in a responsible and sustainable way.
The coming months will test the industry’s willingness to innovate responsibly. The most forward-looking lenders will embrace the tools available to them – private mortgage insurance amongst them - and continue to offer solutions that help maintain activity even in the face of fiscal headwinds like rising stamp duty. Many of those who want to make a property dream a reality, will be relying on you.
