First-time buyers are taking on larger mortgages and stretching their finances further to get onto the property ladder, as borrowing costs climb to their highest level in three years. New figures from Moneyfacts reveal a growing shift towards high loan-to-value (LTV) mortgages, with lenders offering more deals to buyers with smaller deposits.
However, the cost of borrowing remains a major obstacle. The Moneyfacts Average New Mortgage Rate rose to 5.89% at the start of November, up from 5.83% in October. It is the highest reading since November 2023. Meanwhile, average two-year fixed mortgage rates increased to 5.97%, while five-year deals reached 6%.
More mortgage deals for buyers with smaller deposits
Mortgage availability at 95% LTV increased during October, with the number of products rising from 468 to 474. Combined with 90% LTV mortgages, these deals now account for around 24% of mainstream mortgage products.
However, borrowers with larger deposits have seen their options narrow. The number of 60% LTV products fell from 753 to 706, reaching its lowest level since March 2024. As a result, the average LTV across mainstream mortgage products reached a record 79.31%. Moneyfacts said this was the highest level since its electronic records began in November 2011.
Despite greater product choice, buyers with smaller deposits still face expensive borrowing. Average two-year fixed rates at 95% LTV stand at 6.37%, while equivalent five-year deals average 6.33%.
First-time buyers stretch budgets further
Separate figures from the Office for National Statistics (ONS) suggest first-time buyers are borrowing more relative to both property values and their incomes. The median LTV for first-time buyers reached 85.6% in 2025, its highest level since before the 2008 financial crisis. Meanwhile, the average house-price-to-income ratio for first-time buyers increased from 3.7 in 2006 to 4.3 in 2025.
UK Finance figures also show the average age of a first-time buyer has risen from 31 to around 33 over the past decade. Rachel Springall, finance expert at Moneyfacts, said: “Affordability constraints among first-time buyers can lead them to seek out higher LTV options, or decide to borrow at a larger loan-to-income ratio, say over five times their income, with the aim of stretching their budget to secure a home.”
Are first-time buyers skipping starter homes?
Moneyfacts also highlighted a potential shift in buying behaviour, with some purchasers choosing larger homes rather than traditional starter properties. Springall suggested buyers increasingly want homes they can remain in for longer, rather than moving several times.
However, this trend could have consequences for the wider housing market. She said: “Skipping smaller starter homes altogether can disrupt the circulation of property, which could have the repercussion of bottlenecking the wider market.”
For estate agents, fewer moves between property types could mean fewer transactions across the housing chain. Springall added that lenders must find ways to ease affordability barriers without increasing lending risks.
Mortgage rates remain under pressure
Mortgage pricing continued to change throughout October, although lenders adjusted products less frequently. The average shelf-life of a mortgage deal increased from 13 to 17 days.
Nevertheless, mortgage rates remain considerably higher than earlier this year. The Moneyfacts Average New Mortgage Rate stood at 4.90% in March, compared with 5.89% at the start of November.
Moneyfacts suggested fixed rates could ease before the end of 2026 if the outlook for interest rates becomes clearer. Until then, higher borrowing costs and stretched affordability are likely to remain significant obstacles for buyers and estate agents.
