The continued vital nature of high-LTV lending – Bamford

The Building Societies Association's (BSA’s) latest First-Time Buyers: The Missing Millions report is a timely reminder of the persistent structural barriers facing would-be homeowners, even at a time when the mortgage and property markets appear to have a more positive hue to them.

While there’s been some welcome easing in mortgage rates, with more to come perhaps, the reality for many remains unchanged: without access to higher-loan-to-value (LTV) mortgages, homeownership continues to be out of reach. 

The report is clear that affordability pressures are still acute. In fact, saving for a deposit remains the single most difficult hurdle for many prospective first-time buyers.

According to the BSA’s research, 44% of private renters have less than £3,000 in savings. A further 17% have under £10,000.

For context, even a ‘modest’ property purchase at £200,000 – certainly compared to the average UK house price of over £270,000, according to Nationwide – with a 10% deposit requires £20,000 up front, plus costs. The numbers speak for themselves. 

Higher-LTV mortgages, particularly those at 90% or 95%, are therefore critical in reducing this barrier. The report recognises their continued relevance, noting that such products have become more available in recent years, but still relatively limited in scope and certainly more expensive than both lower-LTV alternatives and when compared to pre-financial crisis rates. This matters because, despite good credit histories and regular income, many otherwise creditworthy individuals cannot meet today’s deposit expectations without support. 

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Income growth is still chasing house prices 

The underlying challenge is that, even while incomes have moved upwards in the last year, income growth over a longer period has still not kept pace with house prices.

That has left aspiring homeowners stuck in a cycle – paying high rents, struggling to save, and ultimately excluded from ownership.

The report shows that with a 95% LTV mortgage, only 19% of private renters could afford to buy a £100,000 home. That share drops significantly when you look at more realistic property prices in the South East. Just 9% of those able to afford a £250,000 property using a 95% mortgage live in London or the surrounding regions – where demand is highest and supply is most constrained. 

 

Building societies standing out 

This is where building societies can continue to show their value.

They have consistently demonstrated a willingness to support this segment of the market. Their mutual status gives them the freedom to take a longer-term view of lending, and many have the agility to design niche products that respond to genuine borrower needs.

In the current environment, this includes helping first-time buyers get onto the ladder through higher-LTV lending. 

However, building societies – like all lenders – are operating within a regulated framework that often limits how far they can go. One key constraint is, of course, the 15% flow limit on lending above four-and-a-half times income.

 

Current lending constraints 

In high-cost markets, this rule creates a structural mismatch between what borrowers earn and what they can borrow, even when affordability checks are met. The report rightly highlights this issue, showing that London has the lowest average LTV ratios despite being the most unaffordable region.

The practical effect is that many younger borrowers, or those without family support, are unable to buy, not because they lack prudence or reliability, but because lending rules do not fully reflect regional dynamics. 

As the report outlines, there is a strong case for reviewing the balance between prudential regulation and access to homeownership. This doesn’t mean loosening standards irresponsibly. It means thinking more flexibly about how to support sustainable lending to under-served, but creditworthy, groups. That’s where risk mitigation tools like private mortgage insurance come in. 

 

What private mortgage insurance can do 

Private mortgage insurance gives lenders the confidence to support higher-LTV lending by transferring a portion of the risk.

For building societies in particular, it can be the mechanism that enables broader access to lending without compromising their risk appetite or regulatory obligations. It’s not about encouraging excessive borrowing – far from it. It’s about recognising that with the right safeguards in place, more lending at higher LTVs can be both commercially sound and socially impactful. 

The report also highlights a deeper trend that should concern us all. Since 2006, the UK has seen 2.2 million fewer first-time buyers than we might have expected based on historical norms. That’s not just a statistic. It represents a generation delayed or denied the opportunity to own a home. Many of these individuals are now in their 30s or early 40s, still renting, with limited access to housing equity and constrained financial or social mobility. 

As a market, we need to ask whether we are doing enough to reverse that trend. Building societies have shown that they’re ready to play their part. With the right tools and some measured regulatory reform, they could do even more.

This is not just about products. It’s about creating a housing market that works for more people, in more parts of the country.