Mortgage deals becoming more accessible in good news for first-time buyers

In the early months of 2025, lenders are racing to give the best deals to first-time buyers as the sales market gets off to a strong start. Latest data from Zoopla shows the year has kicked off with higher demand that in 2023 or 2024, as property value growth also starts to steady.

In February, some mortgage rates fell below four per cent for the first time since November following the Bank of England’s decision to cut the interest rate another quarter point to 4.5 per cent. This has brought the figure to the lowest in 18 months.

Racing to offer the best deals, Barclays and Santander both started offering mortgages at 3.99 per cent interest at the start of the year. However, following high demand and an unexpected rise in inflation to three per cent, Santander has pulled it’s five-year deal from the market (but is keeping a two-year deal for now).

Meanwhile, many brokers are now offering deals around the 4.2 per cent mark, down from the highs of recent years. Mortgage rates for two-year deals peaked at 5.94 per per cent on average in September 2023, rising rapidly from 1.2 per cent just two years before.

In more good news for first-time buyers, the availability of 95 per cent LTV mortgages also reached a five-year high at the start of the month, according to Moneyfactscompare.co.uk. This means it could be even easier to afford that first home.

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LTV stands for loan-to-value, a crucial concept to understand when securing a mortgage. It decided by the amount put down for a deposit, versus the total value of the property. For instance, putting down £10,000 on a £100,000 property gives a 90 per cent LTV.

There are less 95 per cent LTV deals on the market, and they do generally tend to carry a higher interest rate for repayments than lower LTV deals. However, they can be a good option for some.

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Rachel Springall, finance expert at Moneyfactscompare.co.uk, explains: “Borrowers with a limited deposit may find it encouraging to see a growth in choice for mortgages available at 95% loan-to-value, now at its highest count in almost five years.”

The Financial Conduct Authority (FCA) also announced in January that it is exploring ways to loosen strict rules around mortgages to enable more people to borrow for a home.

“We will begin simplifying responsible lending and advice rules for mortgages, supporting home ownership and opening a discussion on the balance between access to lending and levels of defaults,” the letter from FCA chief executive Nikhil Rathi said.

Ms Springall says this can only be good news for first-time buyers, adding: “lenders have been urged to do more to support first-time buyers, to boost growth in the economy, thus the debate on the loosening of lending rules.

“Therefore, there is an expectation for more products and innovation to emerge this year.”