High LTI mortgages for first-time buyers surge by 66%

The number of first-time buyers borrowing at 4.5 times their income or above rose 66% in 2025, according to FCA data obtained through a Freedom of Information request by savings app Plum, coinciding with a regulatory change that relaxed limits on high loan-to-income mortgage lending.

The FCA figures show first-time buyer mortgages with loan-to-income (LTI) ratios of 4.5 times salary or above increased from 27,500 in 2024 to 45,800 in 2025. Within that, mortgages at 5.5 times income or above rose tenfold, from 420 to 4,628 over the same period.

The increase follows a July 2025 decision by the Bank of England's Financial Policy Committee, which recommended that regulators allow individual lenders to increase their volume of high LTI mortgage lending. Previously, high LTI lending was capped at 15% of total lending. As an interim measure, lenders were invited to apply for permission to exceed that cap pending the outcome of a formal consultation.

Total first-time buyer lending also rose over the period, with the overall number of FTB loans increasing 16% from 327,001 in 2024 to 380,716 in 2025. The trend was consistent across sole and joint applications. Loans based on single incomes rose from 149,191 to 174,769, an increase of 17%, while joint income loans increased from 177,808 to 205,947, up 16%. Lenders typically classify a joint loan as a first-time buyer mortgage only where both applicants are buying for the first time.

Rajan Lakhani, personal finance expert at Plum, said: "Traditionally, banks loaned four to four and a half times a first-time buyer's income. But the loosening of lending rules means some lenders have offered loans of up to seven times their salaries if they meet certain criteria, including high income and excellent credit scores.

"While the shake-up has been positive in allowing first-time buyers to get on the housing ladder quicker, there are different strategies out there for buyers who don't want to take on more debt than they have to.

"Building a deposit through a Lifetime ISA can mean you borrow less and mitigate exposure to any jump in interest rates later on.

"It also offers the unique appeal of free money, the exact opposite of a mortgage lender, which charges you interest on every penny."

Lakhani added: "The urgency to get on the housing ladder means first-time buyers are borrowing more, when ideally they would be trying to save more as well.

"A bigger deposit is often a greater weapon in the long-term than a bigger loan. For a start, the process of qualifying for a loan is often quicker for those with greater savings, and the cost of repaying the loan is usually cheaper.

"Having a bigger chunk of money saved usually means you can unlock lower interest rates and make considerable monthly savings.

"For example, a buyer with a 20% deposit on an average first-time buyer home is likely to save £132 monthly compared to someone with a 10% deposit based on a price of £225,525 and interest rates of 5.06%.

"A Lifetime ISA, with its 25% government bonus, is designed precisely to help people get there without taking on income multiples they may later regret."