What is loan to value (LTV) and how does it affect your mortgage rate?

What is LTV?

LTV stands for loan to value. It's the size of your mortgage shown as a percentage of the property's value, and it's one of the biggest factors in the interest rate a lender will offer you.

The LTV meaning is easiest to see the other way round. If you have a 10% deposit, you're borrowing the other 90%, so your LTV is 90%. A 25% deposit means a 75% LTV. The bigger your deposit, the lower your LTV, and the less risk the lender is taking on.

That risk is why LTV matters so much. If house prices fall and a lender has to repossess, a buyer with a 40% deposit leaves plenty of room before the lender loses money. A buyer with a 5% deposit leaves almost none. Lenders price that risk into their rates.

How to work out your LTV

The loan to value definition comes down to one simple sum: divide the amount you want to borrow by the property's value, then multiply by 100.

For example, if you're buying a £300,000 home with a £45,000 deposit, you'd borrow £255,000. £255,000 divided by £300,000 is 0.85, so your LTV is 85%.

Lenders use the lower of the purchase price or their own valuation. If you agree to pay £300,000 but the lender's valuer says the home is worth £290,000, your LTV is worked out on £290,000, which pushes it up.

LTV bands and why they matter

Lenders don't set a different rate for every possible LTV. Instead, they group mortgages into bands, usually 95%, 90%, 85%, 80%, 75% and 60%, with some going lower still. Each band has its own set of rates.

To qualify for a band, your LTV needs to be at or below it. An LTV of 85.1% doesn't count as 85%. It falls into the 90% band and gets 90% rates. So if you're just over a threshold, finding a little more deposit can move you into a cheaper band.

How LTV affects your mortgage rate

The lower your LTV, the lower the rates on offer. Here's how average rates compared across the main bands in October 2026.

Please note: Average rates from Rightmove mortgage tracker, 13 October 2026.

The biggest single jump right now is between 95% and 90%. Moving into the 60% band also makes a noticeable difference. If you're looking at the top end, our guide to 95% mortgages explains what to expect.

What dropping from 90% to 85% LTV is worth

To see what moving down a band means in practice, here's a £300,000 home bought on a 25-year repayment mortgage, using the average two-year fixed rates above.

Note: Figures in table based on a £300,000 home and a 25-year repayment mortgage, using average two-year fixed rates. Figures exclude fees and are rounded to the nearest pound.

Going from a 90% to an 85% LTV saves £120 a month, or around £2,870 over a two-year fix. That's a meaningful difference, but it's worth being clear about where it comes from. On today's rates, the gap between the 90% and 85% bands is only 0.17 percentage points. Most of the saving comes from borrowing £15,000 less, and the cheaper rate adds to it.

Put another way, the lower rate on its own would save you around £27 a month on a £270,000 loan. Borrowing less on its own would save around £94. Together, they come to around £120.

The gaps between bands change over time as lenders reprice, so the difference could be bigger or smaller when you apply. A broker can tell you what the gap looks like on the day. Our guide to how much deposit you need for a house covers how to plan your savings.

How your LTV changes over time

Your LTV isn't fixed. It moves as you pay off your mortgage and as your home's value changes.

Every repayment you make reduces your loan, so your LTV slowly falls. If house prices rise, your LTV falls faster. That's why many people find they can get a better rate when they remortgage, even if they started with a small deposit.

It can work the other way too. If prices fall, or a valuer puts a lower figure on your home than you expected, your LTV goes up. Our guide to a remortgage down valuation explains what to do if that happens. And if you're coming to the end of a deal, our guide on when to remortgage covers the timing.

What is the best LTV mortgage?

There isn't a single best LTV mortgage for everyone, but there is a sweet spot. Rates generally get cheaper with each band down to 60%, and below that the difference is usually small.

For most buyers, the best LTV is the lowest band you can reach without leaving yourself short of savings for moving costs, furniture and an emergency fund. Stretching to reach 85% rather than 90% makes sense if you're close to the threshold. Emptying your savings to get there may not.

It's also worth looking beyond the rate. A deal with a slightly higher rate and no arrangement fee can work out cheaper overall than a lower rate with a fee of £999 or more, especially on a smaller loan.

Ways to lower your LTV

If you're close to the next band down, there are a few ways to get there:

• Save a little longer or put any bonus or windfall towards your deposit.

• Ask family about a gifted deposit. Our guide to a gifted deposit for buying a house explains how it works and what lenders need.

• Negotiate on the price. A lower purchase price with the same deposit means a lower LTV.

• Look at a slightly cheaper property if the numbers are very close.

Before you start viewing, getting a mortgage agreement in principle will show you roughly how much you can borrow and which LTV band you're likely to fall into.