Why multiple near-prime options are important for first-time buyers – Mortgage Strategy

Atom bank’s Near Prime Index – a biannual report on the state of the non-performing loan market – takes a closer look at the situation facing first-time buyers (FTBs).

It highlights why pride prime has become such an important product for those looking to take their first step on the housing ladder.

The analysis, covering the second half of 2025, shows that FTBs represent a growing part of consumers’ closest customers.

In the previous index, they calculated an average of 25%, but this has increased to 30%.

These borrowers need an informed approach

The data also shows that near prime skews towards those looking to get on the ladder, with FTBs making up 59% of all non-prime borrowers.

As retailers are not only aware of the imminent increase in demand but also expect further growth in the coming months, providing FTBs in this sector takes on even greater importance.

Thin files, big dreams

One factor that is easily overlooked when it comes to foreclosures is that the need for this type of financing is not always driven by prepayment issues.

There is a small group of borrowers who fall outside the main criteria due to a thin credit file: a lack of financial history that pushes them into the next category. Perhaps, understandably, this is most evident among aspiring homeowners. More than a quarter of the merchants we spoke to said this was a particular problem for their FTB customers, rather than missed payments, errors and the like.

Analysis shows that FTBs represent a growing portion of consumers’ closest clients

A consistent concern expressed by brokers has been the pervasive attitude that some lenders show to non-primary borrowers, as if they were one group.

However, in combining both programs of the Near Prime Index so far, it becomes even more clear that these borrowers all have their own unique circumstances, their drivers for falling outside the main criteria, so they need more understanding and informed methods from lenders.

After all, a borrower with a poor credit history is a significantly different prospect than one with a history of payment problems. Recognizing that fact, and working with them in a subtle way, is what retailers are already doing and something lenders should follow.

FTBs of all types are having a hard time with deposits. Rising house prices mean that homebuyers need to save a lot of money, however rising debt and continued inflation have made this more difficult.

On the other hand, brokers have reported that they are seeing a growing appetite for very close cases among traditional lenders.

The situation is more pronounced for close borrowers, considering the lack of comparative options for high loan-to-values. More than one in three brokers (36%) told us that deposit size was the single biggest barrier to submitting an application for their closest FTB client. Meanwhile, 39% said LTVs are the most important factor they look for in lenders, even before a more flexible attitude toward credit history.

We have seen the selective impact of high LTV on these lenders, given the growth in demand since increasing our own maximum LTV by almost 90%. But what is clear is that, as this market grows, sellers and borrowers need a wider range of high LTV options to choose from.

Access to the ladder

Our housing ladder only works if the next generation of homeowners can get on the first rung. As FTBs increasingly rely on collateral funding, that puts more pressure on the lending sector.

Being flexible and understanding about the borrower’s credit profile – and what led them to the original decision – is important, but so is a wide range of high LTV products.

Increased appetite

On the other hand, brokers have reported that they are seeing a growing appetite for very close cases among traditional lenders; as clear a sign as any kind so close it becomes a central consideration.

The need for this type of financing is not always driven by prepayment problems

FTBs are the backbone of the housing market, but at the moment their ambitions are being influenced by the attitude of some lenders towards incomplete – or just poor – credit records.

Addressing that will improve employment and improve market access for all potential homeowners – even if their credit history is completely spotless.

Richard Harrison is head of mortgages at Atom Bank

This article appeared in the May 2026 issue of Mortgage Strategy.

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