Smaller deposits and higher LTVs mortgages drive FTB activity
Gen Z optimistic about homeownership in 2026 amid rising demand for cheaper homes, smaller deposits and higher LTVs
Barclays data reveals that 22 per cent of first-time buyers purchased homes with deposits under £20,000 in December, up 8 percentage points year-on-year
44 per cent of first-time buyers opted for 85-90 per cent LTV mortgages in December, compared to 41 per cent the previous year
As traditional barriers ease, Gen Z is more optimistic about homeownership – 34 per cent aspire to buy a new or first home in 2026, more than double the national average
22 per cent of mortgage holders expect to remortgage in 2026, with nearly two-thirds of this group anticipating an increase in their monthly repayments
Barclays Property Insights analyses proprietary mortgage data alongside consumer research to uncover the key trends shaping the UK housing market
Barclays’ latest Property Insights report suggests that traditional barriers to homeownership are easing, indicated by smaller deposits, consistent demand for more affordable properties, and a growing preference for higher loan-to-value (LTV) mortgages. The research also reveals that a third of Gen Z (34 per cent) hope to purchase a new or first home in 2026, with many already having significant savings set aside towards a deposit.
Gen Z adults are more than twice as likely as the national average to be aspiring to buy a new or first home 2026 (34 per cent compared to 16 per cent). Confidence in the housing market among 18-34 year olds improved from 33 per cent in January 2025 to 40 per cent in December, but affordability remains a significant barrier. Nearly two-thirds (64 per cent) of young prospective buyers cite high house prices as a challenge, and an even greater proportion (61 per cent) say mortgage rates have a bigger impact on affordability than prices themselves.
Despite this, almost six in 10 (59 per cent) Gen Z buyers who are planning to purchase in 2026 have already saved what they consider a significant amount towards a deposit. On average, Gen Z savers report having accrued £19,442, excluding financial assistance or inheritance, compared to £25,760 among all hopeful buyers. Gen Z adults expect to add a further £8,998 to their deposit pot throughout 2026, versus a national average of £11,023.
While the Bank of Mum and Dad remains influential – supporting a third (34 per cent) of recent Gen Z buyers – perceptions around the necessity of support from family or friends appear to be easing, with four in 10 (43 per cent) Gen Z saying inheritance or financial assistance is now essential, compared to 63 per cent at the start of 2025.
Barriers to homeownership improve
Across all age groups, perceptions around the barriers to homeownership eased over the course of 2025, driven by a rise in transactions involving more affordable properties and smaller deposits. While property prices (41 per cent) and the cost of a deposit (39 per cent) remained the greatest obstacles, these concerns were notably lower than in January 2025, when over half (51 per cent) pointed to house prices and 44 per cent to deposit costs.
Barclays Mortgage Book data also shows that deposits below £20,000 accounted for more than a fifth (22 per cent) of first-time buyer purchases in December 2025, up from just 13 per cent a year earlier.
Meanwhile, the average first-time buyer deposit fell by 14 per cent year-on-year, alongside increased appetite for higher loan-to-value borrowing. Over two-fifths (44 per cent) of first-time buyers opted for 85-90 per cent loan-to-value (LTV) mortgages in December, compared to 41 per cent the previous year.
This shift to smaller deposits and higher LTVs suggests that first-time buyers are finding it easier to get on the property ladder, as lenders continue to introduce innovative mortgage products to help more people access the market.
The changes to stamp duty bands in April 2025 also concentrated demand at the lower end of the housing market. Homes priced under £300,000 made up 72 per cent of first-time buyer purchases in May 2025, up from 60 per cent in April. This preference has continued; homes under £300,000 accounted for around two-thirds (65 per cent) of FTB purchases in December 2025, and average nearly seven in 10 purchases (67 per cent) since the change in thresholds.
Wave of remortgaging continues
Looking ahead through 2026, many homeowners will reach the end of five-year fixed-rate deals secured in 2021 during the lower interest rate environment ahead of the 2022 Mini-Budget. The latest research suggests that just over a fifth (22 per cent) of mortgage holders expect to remortgage in 2026, with nearly two-thirds (64 per cent) of this group anticipating an increase in their monthly repayments. In response to rising payments, four in 10 (39 per cent) say they plan to cut back on small luxuries, while close to three in 10 (28 per cent) will review their monthly budgets to reduce household bills.
Beyond refinancing, housing remains a key financial focus for many homeowners, with over a third (34 per cent) planning housing-related changes in 2026. Half (51 per cent) of homeowners are actively saving for housing-related expenses, including home improvements (28 per cent), building an emergency fund (19 per cent), and investing in energy efficiency upgrades (9 per cent).
Jatin Patel, Head of Mortgages, Savings and Insurance at Barclays, said:
“Our latest data shows clear signs that confidence in the housing market is beginning to stabilise, despite ongoing affordability pressures. Younger buyers, particularly Gen Z, are highly motivated to get on the property ladder and lenders are helping to meet this demand by providing innovative products that increase how much customers can borrow.
“Many existing homeowners are preparing for higher borrowing costs in 2026 as they roll off 5-year fixed-rate deals, prompting a renewed focus on budgeting, saving and longer-term planning. Whether it’s building an emergency fund, remortgaging, or investing in home improvements and energy efficiency, households will be taking a more considered and proactive approach to managing their housing costs in 2026.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said:
“One of the biggest barriers first-time buyers face is raising a deposit, particularly in London and the South East, where property values are higher. With wage growth failing to keep pace with property price increases and rising rents, first-time buyers without financial assistance from the Bank of Mum and Dad are not able to save for a deposit fast enough. Instead, they find themselves further priced out.
“While the average first-time buyer deposit is 20 per cent, lenders are doing their bit by offering more choice of mortgage at higher loan-to-values at competitive rates with broader criteria. This is important; the higher cost of living, including high rents, means it is hard to save significant sums, particularly for those who don’t have help from the Bank of Mum and Dad. Having the option of raising a smaller deposit is crucial in making home ownership more affordable and accessible.”
Julien Lafargue, Chief Market Strategist at Barclays, said:
“The UK economy continues to recover as the uncertainty surrounding the budget has dissipated. The recovery is slow yet real, which keeps us optimistic over the UK economy’s prospects in the first half of 2026.
“That said, the recent upward move in the unemployment rate is worth monitoring closely. But with additional interest rate reductions expected, we believe this headwind can be overcome.”
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