Help is really out there: Getting the message to FTBs

First-time buyers (FTBs) face an extra stretch to get onto the housing ladder following the cut to stamp duty relief at the start of this month. Raising a deposit is one of the toughest challenges for would-be buyers, who are typically trying to save at the same time as paying rent. With real wage growth failing to keep pace with rising costs, it is a daunting task that has been made harder now that the nil-rate stamp duty band for FTBs has dropped from £425,000 to £300,000.

Average House Price

In London, the average FTB home costs £473,282, according to the Office for National Statistics (ONS). This would mean a stamp duty bill of £8,664. Beyond the capital, the proportion of local areas in England where the average FTB home is now caught in the stamp duty net has almost quadrupled overnight, from 8.4% to 32%, according to research by Skipton Building Society. The lender’s affordability index also found that almost 90% of aspiring FTBs had been priced out of their local area.

Lenders are starting to make exceptions and go outside policy if the rest of the case is really good.

At the same time, another government scheme is gradually becoming less generous as house prices increase. The Lifetime ISA (LISA), brought in to replace Help to Buy, provides a top-up of up to £1,000 in each year that savers put aside £4,000 towards a deposit on their first home. However, the maximum purchase price for a property allowed under the scheme is £450,000. This means that if a buyer has saved thousands of pounds in a LISA but cannot find a property in their area for under £450,000, they may not use the government bonus payments towards their deposit. Instead, they must withdraw their money and pay back 25% as a penalty.

Skipton forecasts that, by the end of 2027, the average FTB property price in more than one in 10 local authorities will be more than the LISA purchase limit, leaving thousands of savers liable for the penalty.

We intend to relax lending standards to allow more FTBs to come into homeownership.

Industry experts have long called on the government to bring forward a meaningful replacement for Help to Buy. But, in the meantime, brokers say lenders are doing their best to bridge the affordability gap with innovative products. The availability of high loan-to-value deals is also improving, according to Moneyfacts data. The number of 95% LTV products reached 395 in March — the highest level for five years.

Loan-to-Income Ratios

Moneyfacts finance expert Rachel Springall says current rules will continue to make it challenging for lenders to do more. “As has been the case for the past 10 years, regulations stipulate loan-to-income ratios of 4.5 or more do not exceed 15% of new lending. Until lenders see a relaxation to these rules, some will have no choice but to pose limitations on those borrowing at higher-LTV tiers.”

We have seen more lenders move into the joint-borrower, sole-proprietor space in the past 12 months.

UK Finance has called for these rules to be eased, alongside lenders including Nationwide Building Society, which had to curb its Helping Hand mortgage lending in January because of the restrictions. Borrower demand for higher income multiples looks set to remain strong given how average house prices compare to earnings in different regions. The latest ONS affordability figures show that, in 2024, the average house price for England was £290,000 — or 7.7 times average full-time earnings of £37,600. That is down from 8.4 times earnings in 2023, while in Wales it has reduced from 6.2 to 5.9 times earnings over the same period.

Despite this improvement, however, last year only 9% of local authorities across England and Wales — or 27 out of 318 — had average house prices of less than five times average earnings and were therefore deemed “affordable” areas by official measures.

FTBs in 2025 are facing a market that, on paper, should be cooling but continues to defy expectations.

It is the highest percentage of ‘affordable’ local authorities for any year since 2015. Back when the data series began in 1997, the figure was 88%. Meanwhile, Rightmove figures show that a typical FTB in Britain now faces an average monthly mortgage payment of £940 — a 59% increase compared with £590 per month five years ago.

Lender Support

Mortgage Advice Bureau business principal Kate Fuller says brokers are making use of a suite of product and criteria innovations from a variety of lenders to help their FTB clients. Among these, she cites Skipton’s Track Record mortgage, which allows buyers to use their history of rent payments to demonstrate they can afford loan repayments; Accord’s £5,000 deposit mortgage; and the growing number of lenders that are offering up to 5.5 times income. These are all part of a broker’s essential toolkit when placing FTB cases.

We know that rents are very high in many parts of the country, and people may be demonstrably able to pay those high rents.

Fuller says: “We have also seen more lenders move into the joint-borrower, sole-proprietor space in the past 12 months, where the borrower can have a family member go onto the mortgage to help with affordability. We are using those more and more frequently.” Flexibility and a common-sense approach are also critical, according to Fuller. She is seeing some mid-sized lenders offer more flexibility on aspects of their criteria.

“Quite a few are starting to make exceptions and go outside policy if the rest of the case is really good,” she says. “For example, a self-employed borrower who has only a year’s accounts but did the same role when they were employed. Or a borrower with a historical credit blip from a parking fine when they were younger.”

Quilter mortgage expert Karen Noye highlights other innovations from lenders that are proving useful to brokers when assisting FTB clients.

Lenders that are offering innovative products need to think about what happens when buyers move on.

“Nottingham Building Society has introduced mortgage deals offering up to £5,000 cashback, aiming to alleviate initial financial burdens associated with property purchases,” she says. “Similarly, Generation H’s new-build boost scheme allows buyers to secure homes with just a 5% deposit, combining a traditional mortgage with an interest-free equity loan covering 15% of the property value. Additionally, Vida Homeloans has launched products enabling purchases with a 3% deposit, targeting those with diverse financial backgrounds who may have been overlooked by mainstream lenders.”

Advoco Financial mortgage adviser Robert Dibb says product innovations are giving families a range of ways to help younger relatives onto the housing ladder without having to hand over cash as a gifted deposit. From allowing a charge to be placed on their property to setting money aside in a ring-fenced savings account, parents and grandparents have a growing number of options.

House prices are proving more resilient than many expected.

“One of the major challenges is making buyers aware that there are all these products. You have got to encourage them to call in the first place,” says Dibb. He feels that progress is being hampered by negative sentiment and the public perception that there is a lack of low-deposit deals and other FTB products. Dibb would like the consumer press to do more to challenge this and educate aspiring buyers about the improving product and criteria landscape.

Noye agrees that a concerted effort is needed to raise awareness of what is available to buyers. Through brokers and lenders collaborating to create workshops and educational material, she believes the industry can get the message out there.

Defying Expectations

Despite this call to action and the affordability pressures that buyers face, Noye remains upbeat about prospects for this year. “FTBs in 2025 are facing a market that, on paper, should be cooling but continues to defy expectations,” she says.

It’s encouraging that the regulator is considering how it may be able to enable FTBs to borrow more in a responsible way.

“A growing pool of would-be buyers is competing for a limited number of properties, which means that, even in an uncertain economic climate, house prices are proving more resilient than many expected.” Fuller says the forecast trajectory for prices over the next year is relatively healthy for FTB sentiment. “We aren’t expecting to see house prices rise dramatically this year, but we are also not expecting them to drop,” she says. “It should be a fairly stable market — almost flat with just a little bit of a rise.”

That is important because, even if FTBs are desperate to save cash, they are unlikely to feel confident about making a purchase in a falling market, particularly when borrowing at high LTVs. As important as FTBs are to the market, government and lender initiatives should not overlook those further up the ladder, warns Fuller. She says some borrowers who were able to purchase only thanks to enhanced FTB criteria and income multiples are now struggling to remortgage or port their loan to a new home.

Progress is being hampered by negative sentiment and public perception.

“Unless you have had pay rises by the time you remortgage, you can find that you technically do not qualify for the loan you already have. So lenders that are offering innovative products do need to think about what happens when buyers are moving on.” In terms of government interventions on her wishlist, Fuller would like to see stamp duty incentives for downsizers to help get the market moving and free up family homes. She also wants ministers to urgently raise the property purchase price limit for LISAs and ensure it is pegged to house price inflation in the future.

Regulatory Shift

Others have welcomed a shift in tone from the regulator, which could give lenders more confidence in product design and criteria. It comes after the chancellor’s Mansion House speech last November, when Rachel Reeves called on City firms to do their part in the push for economic growth, adding that regulations had gone “too far” in trying to eliminate risk after the last financial crisis. The FCA is seeking feedback from the industry on alternative approaches to its stress-testing rules and recently reminded lenders of the wiggle room that already exists.

Nottingham Building Society has introduced mortgage deals offering up to £5,000 cashback.

Chief executive Nikhil Rathi said: “Firms have the flexibility to help more people become homeowners and we want them to use it.” In June, the watchdog will launch an open discussion on the future of the mortgage market and how to ensure it serves consumers at every stage of their life. Speaking to MPs on the Treasury select committee in March, Rathi went further in signalling the FCA’s new approach, saying some lenders had been “too cautious” in their assessments of borrowers.

“We know that rents are very high in many parts of the country, and people may be demonstrably able to pay those high rents, and they manage to sustain their finances in doing so,” he said. “And yet, if their monthly mortgage payment is somewhat lower than that rent, that may still not meet some of the affordability tests that are there. We have to ask the question: is that a sensible position for us to be in, or do we need to show a little more flexibility in that area?”

One of the major challenges is making buyers aware that there are all these products.

Rathi added: “We intend to relax lending standards to allow more FTBs to come into homeownership, but we can’t do that and at the same time say there will be fewer defaults.” Rightmove mortgage expert Matt Smith says: “It’s encouraging that the regulator is considering how it may be able to enable FTBs to borrow more in a responsible way, as we think this will help to unlock more opportunity.”

It is a difficult balancing act for the regulator and lenders to help FTBs without introducing too much risk. But it seems there is willingness on both sides to try to do more.

Help is really out there: Getting the message to FTBs

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