Many aspiring first-time buyers may be delaying homeownership because they misunderstand how much deposit is needed to secure a mortgage, according to new research from Mortgage Advice Bureau (MAB).
The broker firm says there remains a significant “deposit myth” among prospective buyers, with awareness of low-deposit and alternative mortgage products still surprisingly low.
The research found that 73% of respondents were unaware that 95% loan-to-value mortgages exist, despite these products requiring just a 5% deposit.
At the same time, 80% had never heard of track record mortgages, which allow renters to use evidence of consistent rental payments to support a mortgage application.
FAMILY HELP OPTIONS
MAB also found that 70% of respondents were unaware of the full range of family-assisted mortgage products available.
The findings suggest many prospective buyers may be ruling themselves out of the market unnecessarily before fully understanding the options open to them.
More than a quarter (27%) said the deposit requirement was the biggest obstacle to buying a home, while 39% believed they needed at least a 10% deposit to secure a mortgage. Only half of respondents correctly identified 5% as the typical minimum deposit required.
The research also highlights confusion around family support options. While 52% said they would consider help from parents or relatives to improve borrowing power, almost three in ten (29%) did not realise this type of support existed beyond gifting a cash deposit.
Wider uncertainty around the buying process also remains evident, with 31% saying they simply do not know how to get started.
NEVER ASSUME
Rachel Geddes, Strategic Lender Relationship Director at Mortgage Advice Bureau, says: “For many aspiring homeowners, the biggest barrier isn’t always the reality of the deposit required – it’s what they believe that number needs to be.
“What this research shows is that a large proportion of buyers are making decisions based on assumptions, particularly around how much they need to save before they can even consider buying.
“With a wide range of low-deposit and alternative mortgage options now available, understanding the different routes to homeownership is crucial.”
FIRST-TIME MISCONCEPTIONS
David Morris, Head of Homes at Santander UK, adds: “With so many misconceptions about what it takes to buy a home, many first-time buyers could be missing out on their chance to get on the housing ladder by not talking to an expert.
“Brokers are specialists in helping their clients see beyond the widely reported affordability struggles, instead looking at their individual circumstances to see what’s possible and using their knowledge to find the most appropriate options in the market.
“With many lower deposit mortgage solutions coming to the market, many first-time buyers could find that they’re closer than they think to get the mortgage they want and to being able make their homeownership dreams a reality.”
