London Daily

Focus on the big picture.
Friday, Aug 01, 2025

Mortgages for first-time buyers

Mortgages for first-time buyers

Taking the first step onto the property ladder can be daunting. But as a first-time buyer struggling to amass a big enough deposit, it will come as welcome news to know that 95% mortgages are now more freely available.
What is a 95% mortgage?


For many first-time buyers, meeting deposit requirements is the biggest hurdle to realising the dream of home ownership.

This is where a 95% mortgage can help, as with a home loan at 95% loan-to-value (LTV), you only need to raise a deposit of 5%.

The LTV is a ratio of a home loan relative to a property’s value. For example, a mortgage worth £190,000 on a £200,000 home has a 95% LTV. You then make up the 5% difference with a deposit – in this case, £10,000.

Low-deposit lending making a comeback


During the uncertainty of the pandemic, banks became much more risk averse and many pulled their 95% mortgage deals.

But things are beginning to change with lenders, once again, offering low-deposit deals.

This will give hope to young buyers previously locked out of the housing market because they were finding it too tough to scrape together 10% or more of a property value.

What is the government’s Mortgage Guarantee Scheme?


As a borrower, you will find that 95% mortgages are now more widely available. This is largely thanks to the government’s Mortgage Guarantee Scheme. This initiative, which began in April this year, enables you to purchase a property costing up to £600,000 with a deposit of just 5%.

The scheme is not limited just to first-time buyers. It’s also available for movers who have little equity in their existing home. The government launched this scheme in the hope that, by offering a financial guarantee to lenders, they would be willing to reintroduce lending at a higher LTV.

This plan seems to have worked as there are now a host of lenders, including Barclays, HSBC and Lloyds, all participating. Here are some of the mortgage deals that are on offer under the scheme at the time of writing (July 2021):

*  Barclays Two-year fixed at 3.99% with no fee, and a five-year fix at 4.09%, also no fee

*  HSBC Two-year fixed at 4.29% with no fee, or a 3.99% fix with a £999 fee. Fee-free, five-year fixes also available

*  NatWest Two-year fixed at 3.9% and a five-year fix at 4.04%, both fee-free

*  Virgin Money Five-year fixed at 3.99% with no fee. 10 and 15-year versions also available

With the Mortgage Guarantee Scheme, you need to check the small print. Some lenders will not lend on new-build properties. With others, lending on flats and maisonettes may come with restrictions. Certain lenders have caps on maximum loan size (no more than £500,000, for example), or on the length of the mortgage term (say, not beyond 30 years).

What are my other options with a 5% deposit?


A further option if you are struggling to save a large enough deposit is the Help to Buy Equity Loan scheme. This is another government initiative which enables you to get a mortgage with just a 5% deposit. However, it is only available to those buying a new-build home.

With this scheme, the government will lend you up to 20% of the property’s value. Along with your 5% deposit, this enables you to access mortgage deals at 75% LTV which are cheaper. In London, the government will lend up to 40%. There’s no interest to pay on this government loan for the first five years.

However, as a borrower with a 5% mortgage, don’t make the mistake of assuming you can only get a mortgage via a government scheme.

More lenders – including the Nationwide, Yorkshire, Coventry and Leeds building societies – are now offering 95% home loans on the open market. And some deals may offer better value than those on offer under government initiatives.

How do you choose a 95% mortgage?


When searching for a 95% mortgage, you need to compare deals which you can do with a comparison website and online mortgage calculator.

It’s also worth speaking to a mortgage broker who can scour the market for you. This can be particularly helpful when trying to navigate the home loan market for the first time.

A broker will be able to find the deals best suited to your individual situation. They will also know how to present your case to the right lender and in the best possible light. With some brokers you don’t pay a penny as they take their fee from the lender instead.

How do you qualify for a 95% mortgage?


To qualify for a home loan with a 5% deposit, you’ll have to pass the bank or building society’s strict eligibility criteria. This will include affordability checks, and the lender looking at your credit report to see that you are credit-worthy.

When applying, you will need to provide paperwork such as bank statements, recent payslips for evidence of income, plus documents that prove your identity. For example, your passport and/or utility bills.

What are the benefits of a 95% mortgage?


The major upside of a 95% home loan is the fact you only need to save a deposit of 5% (in addition to fees such as stamp duty and conveyancing).

While this is still a large amount of money, it can either make it a lot easier or just possible, to reach your savings goal.

What are the risks?


Lenders view 95% mortgages as more risky. As a result, these low-deposit mortgages cost more than home loans for borrowers who can scrape together a deposit of 10% or more.

If you do find a 95% mortgage with an appealingly-low headline mortgage rate, it may come with hefty fees which could bump up the overall cost. When doing your sums, factor in the fee by dividing it by the number of months of the mortgage (say, 24) and adding it to the repayment cost.

Taking a 95% mortgage also puts you at the mercy of house prices falling. If this happens, you could potentially find yourself in negative equity (meaning you owe more than your home is worth).

Tread carefully and seek advice before deciding to borrow at this level.

Newsletter

Related Articles

0:00
0:00
Close
JD.com Launches €2.2 Billion Bid for German Electronics Retailer Ceconomy
Azerbaijan Proceeds with Plan to Legalise Casinos on Artificial Islands
Former Judge Charged After Drunk Driving Crash Kills Comedian in Brazil
Jeff Bezos hasn’t paid a dollar in taxes for decades. He makes billions and pays $0 in taxes, LEGALLY
China Increases Use of Exit Bans Amid Rising U.S. Tensions
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
Procter & Gamble to Raise U.S. Prices to Offset One‑Billion‑Dollar Tariff Cost
House Republicans Move to Defund OECD Over Global Tax Dispute
Botswana Seeks Controlling Stake in De Beers as Anglo American Prepares Exit
Trump Administration Proposes Repeal of Obama‑Era Endangerment Finding, Dismantling Regulatory Basis for CO₂ Emissions Limits
France Opens Criminal Investigation into X Over Algorithm Manipulation Allegations
A family has been arrested in the UK for displaying the British flag
Mel Gibson refuses to work with Robert De Niro, saying, "Keep that woke clown away from me."
Trump Steamrolls EU in Landmark Trade Win: US–EU Trade Deal Imposes 15% Tariff on European Imports
ChatGPT CEO Sam Altman says people share personal info with ChatGPT but don’t know chats can be used as court evidence in legal cases.
The British propaganda channel BBC News lies again.
Deputy attorney general's second day of meeting with Ghislaine Maxwell has concluded
Controversial March in Switzerland Features Men Dressed in Nazi Uniforms
Politics is a good business: Barack Obama’s Reported Net Worth Growth, 1990–2025
Thai Civilian Death Toll Rises to 12 in Cambodian Cross-Border Attacks
TSUNAMI: Trump Just Crossed the Rubicon—And There’s No Turning Back
Over 120 Criminal Cases Dismissed in Boston Amid Public Defender Shortage
UN's Top Court Declares Environmental Protection a Legal Obligation Under International Law
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
The Podcaster Who Accidentally Revealed He Earns Over $10 Million a Year
Trump Announces $550 Billion Japanese Investment and New Trade Agreements with Indonesia and the Philippines
US Treasury Secretary Calls for Institutional Review of Federal Reserve Amid AI‑Driven Growth Expectations
UK Government Considers Dropping Demand for Apple Encryption Backdoor
Severe Flooding in South Korea Claims Lives Amid Ongoing Rescue Operations
Japanese Man Discovers Family Connection Through DNA Testing After Decades of Separation
Russia Signals Openness to Ukraine Peace Talks Amid Escalating Drone Warfare
Switzerland Implements Ban on Mammography Screening
Japanese Prime Minister Vows to Stay After Coalition Loses Upper House Majority
Pogacar Extends Dominance with Stage Fifteen Triumph at Tour de France
CEO Resigns Amid Controversy Over Relationship with HR Executive
Man Dies After Being Pulled Into MRI Machine Due to Metal Chain in New York Clinic
NVIDIA Achieves $4 Trillion Valuation Amid AI Demand
US Revokes Visas of Brazilian Corrupted Judges Amid Fake Bolsonaro Investigation
U.S. Congress Approves Rescissions Act Cutting Federal Funding for NPR and PBS
North Korea Restricts Foreign Tourist Access to New Seaside Resort
Brazil's Supreme Court Imposes Radical Restrictions on Former President Bolsonaro
Centrist Criticism of von der Leyen Resurfaces as she Survives EU Confidence Vote
Judge Criticizes DOJ Over Secrecy in Dropping Charges Against Gang Leader
Apple Closes $16.5 Billion Tax Dispute With Ireland
Von der Leyen Faces Setback Over €2 Trillion EU Budget Proposal
UK and Germany Collaborate on Global Military Equipment Sales
Trump Plans Over 10% Tariffs on African and Caribbean Nations
Flying Taxi CEO Reclaims Billionaire Status After Stock Surge
Epstein Files Deepen Republican Party Divide
Zuckerberg Faces $8 Billion Privacy Lawsuit From Meta Shareholders
×