Written by Rachel Springall, Finance Expert at Moneyfactscompare.co.uk
Mortgage affordability has been a hurdle for first-time buyers. The good news is that mortgage rates have been falling, and relaxation in stress testing gives new buyers more scope to secure a deal, such as those with a small deposit.
Innovation is set to become a key talking point this year, as expanding options for first-time buyers and modernising regulation are some of the key themes to be reviewed by the Financial Conduct Authority, laid out in its ‘Roadmap’ for the mortgage market.
Building societies have been working hard to support new buyers; however, the biggest banks traditionally have more margin to price their mortgages lower. However, mutuals are leading the charge to provide more innovative products, such as the Track Record Mortgage from Skipton Building Society, the Helping Hand offer from Nationwide and the Rent to Own mortgage from Hanley Building Society.
Despite the positive changes to bless the mortgage market, some borrowers may have little option but to take out a lengthy term on their mortgage to afford monthly repayments. According to UK Finance, the average first-time buyer mortgage term is now 31 years as of March, compared with 28 years a decade ago. However, longer mortgages incur more interest, so making overpayments to reduce the term is wise. A regular overpayment of £200 per month on a £250,000 mortgage can shave almost 13 years off a 40-year term and save more than £123,000.
The relaxation in stress testing over the past six months and mortgage rate cuts can help ease the affordability constraints on borrowers. The market has already seen progress in lending at higher LTV ratios during the last year, so further growth is looking promising in 2026. The Bank of England revealed the share of gross mortgage advances with LTV ratios exceeding 90% was 7.4% in Q3 2025, up from 6.6% a year earlier, the highest quarterly share in 17 years (2008 Q2, of 10.4%).
The Government has been very vocal that it wants lenders to do more to support buyers to boost UK growth, so any improvement to offer mortgages at the higher loan-to-value spectrum should be celebrated as it improves competition. However, there does need to be more progress to address the lack of affordable housing, as those with little equity are at risk if house prices plummet.
First-time buyers might be surprised to find they could now get their first foot on to the property ladder because of the evolving mortgage market. The wisest choice before entering any arrangement is to seek independent advice from a broker to navigate the mortgage maze.
