Struggling to save a deposit for a new home? You may want to consider taking out a high loan to value (LTV) mortgage.
Earlier this year, the government was reportedly considering a scheme that guarantees 99% LTV mortgages in a bid to help first-time buyers with small deposits.
Although a scheme was not confirmed in the Spring Budget, there are high LTV mortgages available that could be just the ticket.
Here, we lift the lid on what they are and what they could mean for you.
How do 99% LTV mortgages work?
A 99% LTV mortgage is where a lender gives you a loan worth 99% of the property’s sale price. It means that you, the borrower, need to fork out just 1% of the price as a deposit.
So let’s say you agreed to buy a home for £263,600, the average UK house price according to our House Price Index published in February. You’d need to have a £2,636 deposit in the bag.
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Which banks are offering 99% LTV mortgages?
There are no exact 99% LTV mortgages on the market right now. But there are mortgages at 90%, 95% and even 100% LTV for borrowers unable to save a chunky deposit, according to Moneyfacts.
The pool of mortgages tends to be more limited for buyers with a small deposit - in other words, those looking for a high LTV mortgage.
Moneyfacts data shows that there are currently 19 mortgage options available at 100% LTV. In other words, you don’t need to put down a deposit at all. The vast majority of these are guarantor mortgages, where someone close to the borrower acts as a guarantee on their behalf. The exceptions are mortgages from Skipton Building Society and Beverley Building Society, says Moneyfacts.
The choice increases as the LTV drops. There are 320 mortgages available at 95% LTV and that figure jumps to 770 mortgages at 90% LTV (and 1050 at 75% LTV).
To put it another way, the highest LTV mortgages - 100% LTV - represent just 0.3% of the entire residential mortgage market. Meanwhile, 95% LTV and 90% LTV mortgages make up 5.3% and 12.6% of that market respectively, according to Moneyfacts.
In contrast, 75% LTV mortgages make up 17.2% of the whole residential mortgage market.
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What are the interest rates for 99% mortgages?
Skipton Building Society hit the headlines in May 2023 when it unveiled the Track Record mortgage.
It was the first 100% LTV mortgage launched since 2008 without the need for a guarantor.
Although you don’t need a deposit for the Track Record mortgage, you could still be eligible if you have a deposit of up to 5%.
The mortgage offers a five-year fixed-rate of 5.45%, with a maximum term of 35 years.
Charlotte Harrison, CEO of Home Financing at Skipton, said at the time: “We recognise there’s a clear gap in the market for people who have a strong history of making rental payments over a period of time so can evidence affordability of a mortgage – but there is currently no solution for them to buy a property due to lack of savings or access to family wealth.
“It is time for a re-think on these massive barriers to home ownership, and we’re proud to take the lead on bringing to the market solutions for such a massive social problem.”
Elsewhere, Beverley Building Society’s Property Assist mortgage lends 100% of the property price to first-time buyers.
The building society says it offers the opportunity for close family members to secure the equivalent of a 20% deposit in the form of a legal charge.
The mortgage is available at a three-year variable rate of 5.89%, with a maximum term of 40 years.
Simon Glass, head of new business at Beverley Building Society, explained earlier this year: “We understand the challenges aspiring homeowners, particularly first-time buyers, face in today's market. Our commitment is to empower first-time buyers to start their home ownership journey.
“Property Assist is more than a product; it's a solution crafted to break down barriers and open doors to more aspiring first-time buyers.”
Moneyfacts analysis shows that the average rate on a three-year fixed deal at a maximum 100% LTV stands at 4.75%. This rises to 6.03% on a five-year fix.
It’s worth remembering that if you’re considering a home loan, it’s important to read the small print. Eligibility as well as terms and conditions on mortgage options vary.
Are 99% mortgages a good idea?
We asked industry experts in January for their views on a government-backed 99% mortgage scheme. Here’s their take.
If a scheme is confirmed, it would not be the first time the government has stepped in to help first-time buyers with small deposits.
The government’s current mortgage guarantee scheme is designed to boost the availability of 95% LTV mortgages. It was extended in the Autumn Statement until the end of June 2025.
David Hollingworth at L&C Mortgages, says: “Providing a guarantee to reduce the risk for lenders in the wake of the financial crisis certainly helped to boost the range of mortgage options at 95% of the purchase price.
“The guarantee was again put to good use when lenders were slow to return to the higher LTV market after the pandemic. In both cases, it acted as a catalyst for lenders to offer higher LTV mortgages, whether they used the guarantee or not.
“Extending the guarantee could cultivate a range of options for those with only 1% to put down. That would help those who could afford to support the required mortgage but are still trying to squirrel away enough as a deposit.”
The idea of saving less of a deposit to get onto the housing ladder is likely to go down well with first-time buyers, particularly against a challenging economic backdrop.
“99% LTV mortgages could be a good idea in the appropriate circumstances,” says Mark Harris, chief executive of mortgage broker SPF Private Clients.
“With added stamp duty costs, a 99% LTV mortgage can look identical to a 95% LTV mortgage for previous generations. Add in the fact that saving for a deposit while renting is practically impossible and this could be a solution.”
However, there’s the question of how expensive 99% LTV mortgages could be.
Hollingworth reckons that while they could accelerate the path to homeownership, they’re likely to carry a higher rate than 90% or 95% mortgages.
He adds: “Having said that, it could still be an attractive proposition in a market where rents have been climbing and the lack of security of renting has helped to maintain the demand and appetite of first-time buyers.”
Critics argue that 99% LTV mortgages could leave borrowers particularly exposed to negative equity. This happens when the value of your home becomes less than the remaining value of your mortgage.
Harris explains: “Negative equity would only become relevant if you needed to move. But assuming gradual house price inflation and a repayment mortgage, where you chip away at the balance each month, equity will be gradually created over time, reducing the loan-to-value.
"There are 100% LTV mortgages available today – for example, Skipton Track Record, which uses the evidence of long-term rent payments as part of its affordability basis and assessment. Also, Barclays Springboard, which uses equity in a guarantor’s house, so the net LTV is lower.
"Unlike 100% LTV mortgages in the past, lenders now have more stringent assessments to perform in assessing affordability and stressing, so there is less risk of borrowers over-stretching themselves.”
Hollingworth believes that one of the big challenges first-time buyers could face is mortgage affordability.
“A 99% LTV mortgage won’t solve that problem where the borrower isn’t able to reach the level of borrowing that they need,” he says. “Demonstrating affordability will be crucial in ensuring the lending is appropriate and not overstretching the first-time buyer, so it won’t be for everyone.”
There are also concerns that if the scheme goes ahead, it could fuel house price rises. "Naysayers will no doubt focus on the fact this is a policy to increase demand for housing, not supply, so inevitably the effect on house prices will be upwards,” says Harris.
What else is happening in the mortgage world to support buyers?
A new scheme has been unveiled that could offer mortgage rates below 1% on new-build homes. First-time buyers and existing homeowners could access the deal, called Rate Reducer, via certain housebuilders and lenders.
Here’s how Rate Reducer works. Housebuilders sometimes offer buyers incentives, such as paying their stamp duty bill or legal fees. But in the case of Rate Reducer, the housebuilder’s incentives budget is used to reduce buyers’ monthly mortgage payments over a fixed term.
In addition to cutting monthly payments, buyers will pay more off the capital value of their mortgage because the interest charged on the loan is lower, said Own New, which is behind the scheme.
Say a housebuilder offers a 5% incentive on a new-build home. Rate Reducer would take this ‘pot’ and offset it against the mortgage interest. This effectively reduces the monthly payments over a fixed term of two or five years, depending on the lender’s criteria.
What rates are available with Own New Rate Reducer?
The exact rate will depend on a range of factors. For some buyers with a large deposit or equity, rates below 1% could be available, said Own New.
Here’s an example from Own New of how Rate Reducer could work. A buyer has a 40% deposit and takes out a £350,000 mortgage on a 40-year term and the participating housebuilder offers a 5% incentive. With Rate Reducer, the mortgage rate could drop from 4.79% to 0.99% over two years. That could mean monthly payments of £883 - a monthly saving of £756.
Buyers who sign up to Rate Reducer would still need to meet normal affordability tests. Lenders will want to make sure that buyers can afford payments if the interest rate increases once the fixed term ends.
Barratt Developments is the first housebuilder to join the scheme. Some 60 more are set to follow, including Persimmon, Taylor Wimpey, Bellway and Berkeley Homes.
Meanwhile lenders Halifax and Virgin Money offer the new product, with Gen H, Furness Building Society and Perenna expected to follow in their footsteps.
To access Rate Reducer, buyers need to speak to one of the housebuilders taking part in the scheme. They will then refer buyers to a specialist mortgage broker.
Eliot Darcy, founder of Own New, said: “People can benefit from Rate Reducer whether they have a small or large deposit. For some people who already have equity in their home, it could herald the return of the sub-1% mortgage deal.”
He added: “This is just the product to stimulate the housing market and to give more people a helping hand and initial boost to get onto the property ladder or to secure that new home that will give them the extra space they need.”
Amanda Bryden, head of Halifax Intermediaries, said: “This product gives customers more choice in the way they can benefit from builder incentives and is especially helpful to those who want to see a lower initial mortgage payment as they get set up in their new home."
*Moneyfacts data correct on 7 March 2024.