Majority of UK First-Time Buyers Unwilling to Opt for a 100% Mortgage

by Bhavi Bhudia
Elite First Time Buyers

Purchasing a home is an important decision, often requiring significant capital. First-time buyers (FTB) have the additional burden of needing to save for a deposit while dealing with the rising costs of rent and the ever-increasing price of homes.

Because of this, some first-time buyers consider taking a 100% mortgage, which is a loan that covers the entire cost of the home without requiring a deposit. However, despite the benefits, the majority of UK first-time buyers are unwilling to opt for this option. In this article, we will explore why that is.

What is a 100% Mortgage?

A 100% mortgage is a type of mortgage that covers the entire cost of the house without requiring a deposit. This type of loan is common in some countries, but less so in the UK. The level of risk involved with a 100% mortgage is significant, as the borrower does not have any equity in the home and could be left with negative equity, where the value of the home is less than the outstanding mortgage if the value of the property falls.

Why are FTBs reluctant to take a 100% mortgage?

There are several reasons why the majority of UK first-time buyers are not willing to take out a 100% mortgage:

Higher interest rates

Lenders view 100% mortgages as high-risk loans and charge more interest to compensate. This can lead to significantly higher monthly payments and, over the lifetime of the mortgage, a higher total cost.

Negative equity

If the value of the property decreases or remains the same, and the homeowner wants to sell, they will still owe the full amount of the mortgage, causing negative equity.

Stress testing by lenders

Lenders need to ensure that even if interest rates rise, the homeowner can still afford to make payments. Therefore, the borrower may have to undergo a stress test, which can include a review of their monthly spending, savings, and outgoings. This can be a stressful and intrusive process.

Limited choice of lenders

Not all lenders offer 100% mortgages, and those that do may only be willing to lend a certain amount. This can limit the choice for first-time buyers and lead to a higher interest rate.

A lack of savings can cause financial insecurity

First-time buyers who do not have savings may feel financially insecure when taking out a mortgage with no deposit as they won't have any cushion to turn to.

The Alternatives to a 100% Mortgage

Shared Ownership

Shared Ownership schemes allow first-time buyers to purchase a portion of a property, and they pay rent on the remaining share. This can be an attractive option for those who don't have a large enough deposit to purchase a property outright.

95% LTV Mortgages

A 95% LTV mortgage would require the buyer to provide a 5% deposit, which is less than the standard 10% deposit required by most lenders. This can be a good option for buyers who can save for a small deposit but are struggling to save the full 10%.

Help to Buy Scheme

The Help to Buy scheme is a government initiative aimed at helping first-time buyers get on the property ladder. It is available for both new-build and existing properties but is limited to those who meet certain criteria.


Taking out a 100% mortgage can be tempting for some first-time buyers, but the risks and higher interest rates outweigh the benefits for most. The options for alternatives to 100% mortgages have varying pros and cons, but it's important to weigh up the options before committing to a mortgage. Mortgage advisers can provide guidance on the most suitable option for individual circumstances and help first-time buyers navigate the financial complexities of purchasing a home.