Small deposit no barrier to owning a home - Mortgages - News - Moneyfacts


Small deposit no barrier to owning a home

Small deposit no barrier to owning a home

Category: Mortgages

Updated: 21/01/2014
First Published: 21/01/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Buyers are finding themselves able to get onto the housing ladder with smaller deposits thanks to the increased availability of high loan-to-value (LTV) mortgages.

These low deposit mortgages have been given a boost recently, largely in response to the Government's Help to Buy scheme, and consumers are reaping the benefits. According to research from Mortgage Advice Bureau the average buyer deposit fell by 6% in the last three months of 2013, with the typical homebuyer putting down a deposit of £66,259.

Average house prices, meanwhile, saw a rise of 1% in December which brought them up to £230,372, but the typical LTV rose from 69.3% to 71.2% – further indicating that a growing number of people are able to obtain mortgages with smaller deposits.

Perhaps surprisingly, it was Greater London, the South East and South West that appeared to be benefitting the most. Despite these being areas where deposits are traditionally the highest, the typical deposit saw a drop of between 4% and 12% in the quarter.

Of course there are regional variations. Across the North, North West, Yorkshire and Humberside deposits actually grew faster than purchase prices, while in East Anglia a significant leap was seen in the amount of money people were putting down as a deposit.

This geographical difference, however, could be explained by people moving up the property ladder. They may have gained equity in their current property enabling them to put more towards their next purchase, while those yet to get on the housing ladder can still benefit from a significantly smaller deposit requirement.

Brian Murphy, head of lending at Mortgage Advice Bureau, said: "Raising a deposit has long been the biggest challenge for first time buyers in the current climate. Until recently when property values have improved, even homeowners were struggling with limited equity in their properties to support their next purchase.

"It's encouraging to see a situation emerging where deposit requirements need not block aspiring buyers from taking advantage of growing choice and improving rates."

What Next?

Find the best mortgage deals with our whole of market search

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

85% of remortgagors benefit from lower rates

Mortgage rates are among the lowest ever recorded, and in the case of fixed rates, they just keep falling! This means it’s never been cheaper to fix your mortgage rate for the long term, and unsurprisingly, remortgagors are taking advantage.

Does your mortgage lender owe you money?

Earlier this week, the financial watchdog revealed that hundreds of thousands of mortgage holders could have been overcharged by their lender. Are you one of the many who could be in line for a windfall?

Do you think your home will rise in value?

There’s been a lot of talk recently about the rate of house price growth slowing, but is it affecting your personal expectations? According to research, it could be, with fewer people now expecting the value of their property to increase.