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Almost one in five first-time buyers are searching for mortgages below 60% loan-to-value (LTV), suggesting some can put down large deposits of around 40%¹. However, most still rely on higher loan-to-value deals, with 31% opting for 90% and 10% for 95% mortgages. Those with smaller deposits could pay about £134 more monthly, highlighting widening affordability pressures and a growing financial divide between buyers.

The government has confirmed that the Lifetime ISA will be replaced with a new savings product focused solely on helping first-time buyers. The retirement-saving element will be removed and the 25% bonus will be paid when a home is purchased rather than added to contributions. The change aims to simplify ISAs, though critics warn it could reduce support for retirement saving and leave some savers with fewer long-term options. ISA rules and government incentives may change and depend on individual circumstances.

Mortgage affordability is expected to improve in 2026, with average payments projected to fall to around 40-41% of gross salaries, levels last seen in 2021². This follows a peak of 49% in 2024 as high interest rates stretched household finances. Modest wage growth and stabilising rates could help ease pressure, though ongoing uncertainty in global markets following events in the Middle East means borrowing costs are unlikely to return to the ultra-low-rate era of recent years.

^1&2Moneyfacts 2025/26

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments. This content is for information purposes only and does not constitute financial advice.