Why Near Prime lending is essential for first-time buyers

One area of Near Prime finance that can be easily overlooked is its role in opening up access to the housing market. Analysing our own data when putting together the Atom bank Near Prime Index has highlighted the way that Near Prime skews towards those looking to take their first step onto the housing ladder. Around 59% of our Near Prime cases in the second half of last year involved first-time buyers, while broker surveys showed that aspiring homeowners made up an increasing proportion of their Near Prime workloads. 
 
If we are serious about having a housing market that is accessible, then we need to ensure those with imperfect credit histories are able to obtain competitive mortgage finance. The housing ladder can only function if the first rung is achievable, but that will only be the case if lenders ensure there is funding open to Near Prime borrowers too.

Dealing with deposits

With any first-time buyer, perhaps the biggest obstacle is the deposit. Saving tens of thousands of pounds to put down as a deposit has never been easy, but in recent years it’s become even more challenging. Aspiring buyers just don’t have the room in their budgets to set aside significant sums each month towards the deposit. Meanwhile, house prices and rental costs continue to rise, eroding the real terms value of any improvements in the size of their deposit balance. 
 
The answer has to be more options for borrowers with small deposits, yet progress on this front seems to be going backwards. Recent data from Twenty7tec shows the number of 95% LTV mortgages available for borrowers with CCJs dropped from a high of 980 products in March 2026 to 795 at the start of June.  
 
When we have polled brokers on their experiences, more than a third said that for their Near Prime clients, the size of the deposit was the biggest barrier to submitting an application. Lenders have an important role to play in addressing this hurdle by offering Near Prime products at much higher LTV’s.

Overcoming a lack of history

Another challenge that particularly afflicts first-time buyers is simply their lack of a comprehensive credit history. A sizeable proportion of Near Prime borrowers are classed as such because of a thin credit file, rather than actual payment hiccups in the past. 
 
There are millions of people across the country who are, to all intents and purposes, ‘invisible’ to the credit system because of how little information is available about them and their abilities with credit. That’s not their fault, yet it can prove a real hurdle towards their abilities to raise mortgage finance. 
 
Again, this should be seen as an opportunity for lenders. We don’t want these borrowers to be excluded from the housing ladder because of a lack of data, which is where Near Prime can act as a bridge, helping them establish their credit credentials.

The path to Prime

Near Prime clearly has a role to play as an access point to home ownership, but it also can act as an access point for Prime status. Those borrowers with thin files may miss out on meeting Prime criteria today, but the situation could be rather different a year or two down the line, having kept up with their repayments.  
 
Similarly, prospective buyers with small deposits and the odd payment mistake in the background can utilise Near Prime to help rebuild their credit profile. 
 
If lenders can open up Near Prime lending, working with brokers to ensure the products on offer meet the specific needs of the current crop of borrowers, then we can help support them not only with their buying needs in the present but in progressing along the path back to Prime status.  

For adviser use only. Please note this content has been supplied by our lender partner and as such, is their responsibility. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the information in this article.