First-Time Buyers Held Back by ‘Deposit Myth’

Why It Matters

Misconceptions about required deposits suppress market entry for first‑time buyers, limiting demand and slowing housing turnover. Correcting these myths could unlock a sizable pool of new homeowners and support lender growth in low‑deposit mortgage segments.

Key Takeaways

• 39% of renters think a 10% deposit is mandatory
• Only 50% correctly identify 5% as the typical minimum deposit
• 73% unaware of 95% LTV mortgages; 80% unknown track‑record options
• 31% of first‑time buyers don’t know how to start saving
• Low‑deposit products could boost demand if myths are dispelled

Pulse Analysis

The UK housing market has long been framed by the notion that a sizable cash deposit is the primary hurdle for first‑time buyers. Mortgage Advice Bureau’s 2026 survey challenges that narrative, showing that 39% of prospective owners overestimate the required down payment, while only half recognize that lenders now commonly accept as little as 5% of the purchase price. This misperception is especially damaging in a market where property prices have outpaced wage growth, making the deposit appear even more unattainable. By quantifying the gap between belief and reality, the study highlights a hidden barrier that could be addressed through targeted education.

Lenders have responded to affordability pressures by expanding low‑deposit and alternative mortgage products. High‑loan‑to‑value (LTV) offerings—such as 95% mortgages, track‑record loans that assess borrower history rather than traditional income metrics, and family‑assisted schemes—are now widely available, yet awareness remains low. The survey found that 73% of respondents were unaware of 95% LTV options, and 80% had never heard of track‑record mortgages. These products can dramatically reduce the upfront cash needed, but they also require borrowers to understand nuanced eligibility criteria and potential interest‑rate implications. As lenders continue to refine risk models, the availability of such mortgages could become a catalyst for renewed first‑time buyer activity.

For policymakers and industry stakeholders, the deposit myth underscores the importance of financial literacy initiatives. Clear communication about low‑deposit pathways can broaden the pool of eligible buyers, stimulate demand, and help stabilize house‑price growth. However, expanding access must be balanced against credit‑risk considerations, ensuring that borrowers are not over‑leveraged. By dispelling misconceptions and promoting informed decision‑making, the market can unlock latent demand, supporting both homeownership rates and the broader economy.