Saving a deposit is usually the biggest hurdle for first-time buyers, and it’s often the first question people ask before they even start looking at properties. The honest answer is: it depends on the price of the home and the mortgage deal you want. Here’s a clear breakdown of the numbers, plus practical ways to build your deposit faster.
The Minimum: 5% of the Property Price
Most UK lenders require a minimum deposit of 5% of the purchase price, known as a 95% loan-to-value (LTV) mortgage, meaning you’re borrowing 95% of the property’s value. On a £250,000 home, that’s a £12,500 deposit.
A 5% deposit is the most accessible starting point, but it isn’t necessarily the cheapest way to buy. The smaller your deposit, the higher your LTV, and generally the higher the interest rate you’ll be offered, since the lender is taking on more risk.
How Deposit Size Affects Your Mortgage Rate
| Deposit | LTV | What it typically means |
|---|---|---|
| 5% | 95% | Widely available, but usually the highest rates |
| 10% | 90% | Noticeably more product choice and better pricing |
| 15% | 85% | Access to a stronger range of deals |
| 20%+ | 80% or below | Some of the most competitive rates on the market |
| 25%+ | 75% or below | Often the best rates lenders offer |
There’s no single “correct” deposit size, it’s a trade-off between how long it takes you to save and how much you’ll pay in interest over the life of the mortgage. A broker can show you the real difference in monthly payments between, say, a 5% and 10% deposit on the property you’re looking at.
What a Deposit Actually Looks Like in Practice
To put the percentages into context:
- £200,000 home: 5% deposit = £10,000 | 10% deposit = £20,000
- £300,000 home: 5% deposit = £15,000 | 10% deposit = £30,000
- £400,000 home: 5% deposit = £20,000 | 10% deposit = £40,000
Remember, your deposit isn’t the only upfront cost. Budget separately for stamp duty (if applicable), legal fees, surveys, and moving costs, since these can’t usually be added to the mortgage itself.
Ways to Build Your Deposit Faster
Lifetime ISA (LISA): Save up to £4,000 a year and the government adds a 25% bonus on top, worth up to £1,000 a year. Available if you’re aged 18 to 39, and usable on homes up to £450,000. This cap hasn’t changed since the scheme launched, so it’s worth checking whether it still suits the area you’re buying in.
Mortgage Guarantee Scheme (“Freedom to Buy”): This doesn’t add to your deposit directly, but it encourages lenders to keep offering 95% mortgages, keeping the 5% deposit route genuinely available rather than a rarity.
Shared Ownership: Lets you buy a smaller share of a property (often 25-75%) and pay rent on the rest, which can significantly reduce the deposit you need upfront.
A gifted deposit: It’s common for parents or close family to contribute towards a deposit. Lenders will want a signed letter confirming it’s a genuine gift, not a loan, with no stake in the property attached.
A regular savings account or Help to Buy ISA (if you already have one): Help to Buy ISAs closed to new applicants some years ago, but if you opened one before the deadline, it may still be worth paying into for the government bonus. Check your provider for current rules.
Should You Wait and Save a Bigger Deposit, or Buy Now?
This depends on your circumstances, but a few things are worth weighing up:
- A bigger deposit generally means a better rate and lower monthly payments, but house prices and rents may rise while you save, potentially offsetting the benefit
- Time spent renting is money not going towards your own home
- A 5-10% deposit is often a reasonable, realistic starting point rather than holding out indefinitely for 20%+
There’s no universally “right” answer, it depends on your income, local property prices, and how comfortable you are with a higher LTV mortgage. This is exactly the kind of decision a mortgage broker can model out for you with real numbers.
Frequently Asked Questions
What is the minimum deposit for a first-time buyer in the UK?
Most lenders require a minimum of 5% of the property price, though a larger deposit typically unlocks better interest rates.
Is it better to have a bigger deposit?
Generally yes, a bigger deposit usually means a lower interest rate and smaller monthly payments, but it needs to be weighed against how long it takes to save and rising property prices in the meantime.
Can I use a gifted deposit from my parents?
Yes, this is common and accepted by most lenders, provided they sign a letter confirming the money is a genuine gift and not a loan.
Does a Lifetime ISA cover the whole deposit?
Not usually on its own, but the 25% government bonus can meaningfully speed up how quickly you reach your deposit target.
Can I buy a home with no deposit at all?
True no-deposit mortgages are rare in the UK market and generally require a guarantor or family-assisted scheme. Most buyers will need at least 5%.
Not sure how much deposit you’ll realistically need? Speak to our team for a free, no-obligation breakdown based on your circumstances.
