Expanding access for first-time buyers still comes back to high-LTV lending – Bamford

However, when you strip it back, the regulator is effectively acknowledging something the market has known for some time, which is that the current system works well for many borrowers, yet leaves a growing number unable to get started at all.

The FCA accepts first-time buyers are getting older, borrowing for longer, and facing barriers that are not just about income, but about how much capital they can bring to the table on day one.

Importantly, feedback to last year’s discussion paper highlights groups who could be better served, including those who cannot raise a large deposit and those without access to family support, which is a clear recognition that the Bank of Mum and Dad is not, and never has been, a universal solution.

The regulator has set out a programme of further work, with consultation planned in 2026, covering areas such as high-loan-to-income (LTI) lending, interest-only structures, rental payment recognition and more flexible treatment of income, all of which will of course help, but none of which remove one of the central challenges for many first-time buyers – namely, securing a deposit.

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Deposit still a huge issue

For all the discussion around stress tests and income multiples, the deposit remains the single biggest obstacle for would-be buyers, particularly renters, who are already paying high monthly costs – likely to get higher – and struggling to save at the same time.

FS 25/6 talks about affordability and access, but it does not suggest that deposits are becoming less relevant, and nor should it, because lenders still need meaningful equity buffers, especially at the point of entry. This is where high-loan-to-value (LTV) lending continues to matter, because without it, regulatory flexibility elsewhere may not have the desired impact.

To prove this, there are currently just 10 100% LTV mortgage products available in the market, many of which come with higher rates or tighter criteria, making them suitable for only a very small subset of buyers, which means that for most first-time buyers without family help, the realistic entry point remains at 95% LTV.

Yet even here, while choice has improved, it is not overwhelming. For example, while there are well over 100-plus lenders operating in the UK mortgage market, there are only 264 products available at 95% LTV for buyers purchasing at Nationwide’s current average house price (£270,000 ish), which shows how constrained this part of the market still is.

How FCA proposals may help, but not replace, high-LTV lending

The FCA appears to be placing particular emphasis on changes to high-LTI lending, following the Financial Policy Committee’s (FPC’s) recommendation to give lenders more flexibility within the overall flow limit. This should allow more first-time buyers to borrow more relative to income, which could reduce the cash deposit required in absolute terms, but only if suitable high-LTV products are there to support it.

The same applies to proposals around interest-only, part and part, and low start mortgages, which the FCA is exploring as ways to help certain borrowers manage payments, especially where income growth is expected. These structures may be helpful for some, but they sit on top of an LTV decision, and if lender appetite at 95% remains limited, then the practical impact will be narrow.

Rental payment recognition is another area where the FCA is supportive of further industry-led progress, and this could improve underwriting confidence for long-term renters with strong payment histories. Again, this helps build a case for lending, but it does not solve the deposit gap on its own.

The risk of missing the obvious point

One risk with the current debate is that it becomes overly focused on technical rule changes while skirting around the reality that access to homeownership still depends on how much cash a buyer can initially put down as well as how much they can afford to pay each month.

The FCA itself notes that a cautious approach since the financial crisis may have restricted or delayed access for some consumers, and that is an important admission, because risk has effectively been pushed onto borrowers through larger deposit requirements.

If expanding access is a genuine objective, then high-LTV lending has to be treated as a core part of the solution, not a side issue. That does not mean ignoring affordability or repeating past mistakes, but it does mean recognising that for many first-time buyers, particularly those without family wealth, a 95% LTV mortgage is not a risky option, it is the only viable one.

What this means for lenders and advisers

The FCA has set out a direction of travel rather than firm outcomes, and much of the detail will depend on consultation and market response over the next year. However, regulatory flexibility alone will not deliver better access if lender appetite for high-LTV lending does not increase alongside it.

For advisers working with first-time buyers every day, the message is familiar. Income multiples, stress tests and product design matter, but without a healthy, competitive high-LTV market, many capable borrowers will remain locked out.