Low-deposit mortgage lending has reached its highest share in 18 years as buyers increasingly rely on higher loan-to-value borrowing.
New Bank of England figures show 8.4% of gross mortgage advances were above 90% loan-to-value (LTV) in the second quarter of 2026.
That was up from 8% during the previous quarter and 7% a year earlier.
It also marks the highest proportion since the second quarter of 2008.
The figures highlight the importance of low-deposit mortgages to buyers struggling to build larger deposits.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “The rise in the proportion of mortgages above 90% loan-to-value has reached its highest level in 18 years, showing just how vital low-deposit borrowing has become in the housing market. Saving a large deposit is a daunting task for many borrowers, so it is essential that lenders continue to adjust their affordability criteria fairly and create innovative products to help borrowers.
“Those who do borrow at the highest ends of the loan-to-value spectrum must be warned about the dangers of negative equity if house prices plummet, so seeking good advice and making efforts to overpay a mortgage is a wise choice.”
Mortgage costs remain elevated
The Bank of England figures also point to continued pressure from higher borrowing costs.
The share of mortgage advances priced between two and three percentage points above Bank Rate increased to 3.1%.
That compares with 3% during the previous quarter and 2.8% a year earlier. It was the highest proportion since the first quarter of 2023.
Springall commented: “Mortgages have become more costly over recent years due to higher interest rates, with a larger share of loans priced more than two percentage points above Bank Rate during Q2 2026. The chance of mortgage rates plummeting in the months ahead currently looks unlikely, and in fact, economists are mostly leaning towards the chance of a Bank Rate hike as soon as November.
“It is also worth pointing out that fixed rate mortgages are not tethered to the Bank of England Base Rate, they move more in tune with swap rates, which remain volatile due to wider future rate expectations.”
Mortgage arrears fall
Meanwhile, the value of outstanding mortgage balances in arrears fell by 1.9% during the quarter to £19.7bn.
That was the lowest level since the third quarter of 2023 and 7.3% below a year earlier.
The proportion of total outstanding mortgage balances in arrears remained unchanged at 1.1%.
Springall said: “The mortgage arrears figures suggest that households are widely in control of their repayments. However, circumstances can quickly change, so those borrowers who are feeling pressure due to the cost of living must speak to their lender and seek advice to avoid missing repayments.
“There will be many households looking to remortgage this year, and while they would have been stress tested for potential higher mortgage rates, it is still worth contacting the lender before the deal ends to assess the latest options. A product transfer could be the quickest solution, but seeking advice to navigate more choice outside of one lender before making any arrangements would be wise.”
