I am currently working on my year 1 report, which involves submitting a literature review (not exceeding 5,000 words) and a research paper (not exceeding 6,000 words). My lit review that I have written is very to the point and is about 2,500 words total. I don't know what other people think about this, but I like to write to the point and state the facts rather than write about anything not directly related to my topic. Just a bit worried how strict first year vivas are......

This depends on your area. Unless there is very little research on your topic you should be able to write a lot more that 2500 in a lit review. Think about writing your thesis, aren't you going to have more than 2500 for that introduction?