Several major UK lenders have introduced mortgage products requiring minimal or no deposits, marking a shift in lending practices as banks seek to support first-time buyers struggling with affordability.
Metro Bank recently launched a 100% loan-to-value mortgage for eligible first-time buyers, joining a growing number of institutions offering low-deposit products. The move comes as lenders relax affordability criteria and develop alternative mortgage structures, according to David Hollingworth at broker L&C Mortgages.
Market developments
Lloyds Banking Group introduced a mortgage in May requiring a minimum £5,000 deposit, equivalent to approximately 98% loan-to-value. The five-year fixed rate product carries an interest rate of 5.89% but is limited to properties valued up to £300,000, potentially excluding buyers in higher-priced areas such as London. The product is available through Lloyds, Halifax and mortgage brokers.
Santander offers a similar 98% loan-to-value mortgage with a five-year fixed rate of 5.49%, allowing borrowing up to £500,000 with a minimum £10,000 deposit. Skipton Building Society provides 100% financing up to £600,000 at rates starting from 5.55%, whilst Yorkshire Building Society offers 99% loan-to-value mortgages up to £495,000 at 6.44%.
Joint borrower arrangements
Lenders are also expanding joint borrower, sole proprietor (JBSP) arrangements, which allow applicants to include additional income from relatives or friends without granting them property ownership. Doug Miller at Lansdown Financial Services reported significant demand increases for JBSP mortgages as affordability pressures mount across the housing market.
Metro Bank’s JBSP product permits borrowing between 95% and 100% of property value, requiring an immediate family member as joint borrower. The five-year fixed rate mortgage allows loans up to £675,000 but carries a 6.99% interest rate.
Rate comparisons
Borrowers able to provide a 5% deposit can access standard two- and five-year fixed-rate mortgages from approximately 4.95% to 5.05%. Larger deposits of 10% or more provide access to lower rates and broader product ranges.
The products represent a departure from post-2008 financial crisis lending practices, when 100% mortgages were withdrawn from the market. Hollingworth noted that whilst some buyers may benefit from continued saving to secure better rates, those paying rent may find low-deposit options make ownership more accessible.
The trend reflects broader changes in the lending sector, as financial institutions adapt their products to address deposit barriers facing first-time buyers. Industry professionals advise prospective borrowers to compare options carefully and consider broker consultation before proceeding.
