Minimum Deposit: 5%
The minimum deposit accepted by most UK mortgage lenders is 5%, giving a 95% Loan-to-Value (LTV) mortgage. At this level, you can buy a £250,000 property with just £12,500 saved.
However, 95% LTV mortgages come with the highest interest rates, the smallest choice of lenders, and stricter affordability criteria. The Mortgage Guarantee Scheme (a government initiative) supports some 95% LTV products, encouraging lenders to offer them even in uncertain market conditions.
How Your Deposit Affects Your Rate
Lenders price mortgage deals according to LTV bands. The lower your LTV, the lower the risk to the lender — and the lower your interest rate. Key LTV thresholds are:
95% LTV — highest rates, fewest options 90% LTV — significantly more choice and lower rates 85% LTV — rates improve noticeably 75% LTV — access to competitive deals 60% LTV — typically the best rates available
Moving from 90% to 85% LTV (adding an extra 5% deposit) can reduce your interest rate by 0.3–0.8% depending on the lender. On a £200,000 mortgage, a 0.5% rate reduction saves around £80 per month.
How Much Should You Aim to Save?
A 10% deposit is generally the sweet spot for first-time buyers — it opens up a much wider range of products than 5%, at significantly better rates, without requiring years of additional saving.
If you can stretch to 15% or 20%, the rate improvements continue, but the incremental gain diminishes beyond 25%. Unless you are buying a high-value property or plan to keep the mortgage for many years, spending years extra saving beyond 20% may not be worthwhile.
Remember to budget for costs on top of your deposit: stamp duty, solicitor fees (£1,000–£2,500), survey costs (£400–£1,500), and mortgage arrangement fees (£0–£2,000 depending on the deal).
Schemes That Help with Your Deposit
Lifetime ISA (LISA): Save up to £4,000 per year. The government adds a 25% bonus — up to £1,000 per year — which can be used towards your first home purchase. You must be 18–39 to open one and buy a property costing £450,000 or less.
Help from family (gifted deposit): Many first-time buyers receive a gift from parents or grandparents. Lenders require a signed letter confirming it is a gift (not a loan) and have no interest in the property.
Shared Ownership: Buy a 25–75% share of a property and pay rent on the rest. Requires a smaller deposit (typically 5% of your share) and lets you staircase to full ownership over time.
First Homes Scheme: New-build homes discounted by at least 30% for eligible first-time buyers in some areas.
Tips to Save Your Deposit Faster
Open a Lifetime ISA as early as possible to maximise the government bonus.
Set up a dedicated savings account — ideally a high-interest easy-access account or cash ISA — and automate a fixed transfer on payday.
Reduce discretionary spending and redirect the savings. A £200/month saving adds £2,400 per year to your deposit fund.
Consider a Help to Buy ISA if you opened one before 2019 — it still counts towards your deposit.
Buying jointly with a partner or friend doubles your savings power and may increase what you can borrow.