Specialist lender Hodge is reminding investors and other property purchasers how the size of a deposit now plays a bigger part than ever in long-term financing.
Emma Graham, business development director at Hodge, says: “Many people focus on the monthly repayment when choosing a mortgage, but your deposit size can dramatically affect the rate you’re offered, and the total amount you repay over time.
“A recent announcement from the Prudential Regulation Authority shows that positive steps are being taken to address the issues around affordability and help first time buyers However, with rates still considerably higher than they were three years ago, the impact of a small deposit is more pronounced than ever.”
Deposit Size and Interest Rates: A Growing Divide
Graham continues: “Affordability has worsened for first time buyers, making deposit size even more important for those looking to get onto the property ladder. The average deposit for a first-time buyer now exceeds £60,000, according to UK Finance. However, many are still trying to enter the market with deposits as low as 5%, an option that can carry significantly higher interest rates.
“Choosing a mortgage today isn’t just about finding the lowest rate, it’s about finding a product that supports your specific circumstances, especially in an economic environment where everything from energy bills to grocery costs has gone up.
“If you have a smaller deposit, it’s even more important to get the structure of your mortgage right from the outset.”
Refinancing Pressure
“This year, hundreds of thousands of borrowers are expected to exit fixed-rate deals secured during the ultra-low-rate era of 2020–2022. As these borrowers face much higher interest rates, many could see their repayments jump by £300–£500 a month.
“Whether you’ve gained equity, increased your income or had a change in life circumstances, there may be more options than you think, but the key is acting early and being open to exploring the right type of mortgage for your situation, not just defaulting to what’s most familiar.”
Supporting Financial Flexibility
Graham adds: “While the current market presents challenges, it also offers opportunities for those who take the time to review their position, explore product types and assess how much deposit they can realistically put down.
“In a climate of economic change, having the right mortgage can make a significant difference to your financial security. Whether you’re just starting out or remortgaging after years in your home, your deposit size and your mortgage structure deserve close attention. In today’s shifting mortgage landscape, understanding the role of your deposit has never been more important. Whether you’re stepping onto the property ladder or looking to remortgage, taking time to explore your options, obtaining whole market advice from a broker and assessing how your deposit impacts your deal could be key to protecting your long-term financial wellbeing.”
