The average deposit required by homebuyers fell by 6% between October and December last year, the Mortgage Advice Bureau said, as more took advantage of higher loan-to-value mortgages.
The Bureau said the improved availability and affordability of high LTV mortgages had helped homebuyers with lower deposits to secure a suitable loan.
Deposit levels fell to an average of £66,259 across the final quarter – around 6% below levels in September – despite house prices continuing to rise steadily across the country.
The typical loan-to-value rose from 69.3% to 71.2%, the Bureau said, which demonstrates the impact of the second phase of Help to Buy at the end of 2013.
Introduced in October to support buyers with low deposits, Help to Buy has provided lenders with a guarantee worth up to 15% of the value of a mortgage when they supply mortgages worth up to 95% LTV.
(Found out more about Help to Buy here.)
Reassuringly, the effect has been more pronounced in high-demand areas where prices are rising faster, the Bureau said. Typical deposits fell by 7% in Greater London and by 12% in the South East.
The scheme has also sparked competition in the marketplace, with non-participating lenders also competing to offer low-deposit mortgages.
Brian Murphy, head of lending at the Mortgage Advice Bureau, hailed the impact of the scheme for promoting competition in higher loan-to-value categories.
"Raising a deposit has long been the biggest challenge for first time buyers in the current climate," he said.
"Until recently when property values have improved, even homeowners were struggling with limited equity in their properties to support their next purchase.
"It's encouraging to see a situation emerging where deposit requirements need not block aspiring buyers from taking advantage of growing choice and improving rates."
{loadmodule php,News - Author Box}
{loadmodule php,TwitterButton}