Buying your first home is one of life’s biggest milestones, but it can also feel daunting. In this blog we will cover how deposits affect rates and what low‑deposit options are available. Remember, this content is for information only and does not constitute financial advice.
Why your deposit matters
When you take out a mortgage, lenders look at the loan‑to‑value (LTV) ratio, the proportion of the property’s value you’re borrowing. A smaller LTV (meaning a bigger deposit) usually attracts a lower interest rate because it’s less risky for the lender.
Generally speaking, mortgage rates for first‑time buyers fall into these ranges:
| Approximate deposit (LTV) | Typical 2‑year fixed rate | Typical 5‑year fixed rate |
| 40% deposit (60% LTV) | Around 3.5%–4.0% | Around 3.7%–4.2% |
| 25% deposit (75% LTV) | Around 3.8%–4.3% | Around 4.0%–4.5% |
| 20% deposit (80% LTV) | Around 4.0%–4.5% | Around 4.2%–4.6% |
| 15% deposit (85% LTV) | Around 4.3%–4.8% | Around 4.4%–4.9% |
| 10% deposit (90% LTV) | Around 4.6%–5.0% | Around 4.7%–5.2% |
| 5% deposit (95% LTV) | Around 4.9%–5.5% | Around 5.0%–5.6% |
| 2.5% deposit (97.5% LTV) | Around 5.5%–6.0% | Around 5.6%–6.1% |
These ranges are illustrative and will change depending on the lender, the Bank of England base rate and your personal circumstances. A larger deposit generally reduces your interest rate because it lowers the lender’s risk.
Saving for a deposit
The bigger the deposit you can save, the lower your monthly payments are likely to be. For example:
- On a £200,000 property, a 5% deposit means you need £10,000 and will borrow the remaining £190,000.
- With a 10% deposit, you’d need £20,000 and borrow £180,000.
- A 25% deposit would require £50,000, leaving £150,000 to borrow.
Even an extra 5% saved could move you into a lower LTV band, unlocking a cheaper interest rate and reducing your monthly payments.
Low‑deposit options
Low‑deposit mortgages (95% LTV) have become more widely available again as lenders compete for first‑time buyer business. There are also family‑assisted or guarantor mortgages where a relative’s savings or property acts as additional security. These can enable buyers with small or no deposit to get on the ladder, but they require careful consideration by all parties.
Income Booster & Joint Borrower Sole Proprietor (JBSP) mortgages
Another way to boost affordability is through an Income Booster or Joint Borrower Sole Proprietor (JBSP) mortgage. This arrangement lets a parent, relative or close friend add some or all of their earnings to your mortgage application without taking an ownership stake in the property. You remain the sole proprietor on the deeds, preserving any first‑time buyer stamp duty relief for you and avoiding tax implications for the helper.
With a JBSP mortgage you can typically combine up to four income sources to increase how much you can borrow. The booster isn’t required to contribute to your monthly repayments but is liable if you cannot pay. Because all borrowers are jointly responsible for the debt, lenders will conduct affordability and credit checks on everyone involved. The age of the booster can affect the maximum mortgage term, as most lenders cap the term based on the oldest borrower.
JBSP arrangements differ from joint mortgages: only the main borrower owns the property, whereas all parties are co‑owners in a traditional joint mortgage. They can be helpful for first‑time buyers who need extra income to qualify for a loan but want to maintain sole ownership. However, there are risks: all borrowers are liable for repayments, and non‑owners have no legal claim on the property. As with any mortgage, seek advice from a qualified adviser to understand the legal and financial implications before proceeding.
High‑LTV mortgages (97.5% LTV and above)
In late 2025 a handful of specialist lenders began offering mortgages at up to 97.5% LTV, meaning you only need a 2.5% deposit. These products are typically available for both purchases and remortgages (sometimes including capital‑raising for debt consolidation). They often come with flexible underwriting for borrowers with less‑than‑perfect credit, and can allow higher loan‑to‑income multiples (sometimes over 5× or 6× income). However, rates are generally higher than standard 95% deals, and eligibility criteria may be strict. You’ll usually need to apply through a broker.
Since these are very high‑LTV products, it’s essential to understand the costs. Rates typically start around 5.5%–6% for a short‑term fix, and lenders may not offer longer‑term fixes at this LTV. Because the risk to the lender is higher, you could face steeper monthly payments and should prepare for stricter affordability assessments.
Representative high‑LTV example
Representative example: Purchase price £200,000 with a 2.5% deposit (£5,000), borrowing £195,000 over 25 years. The mortgage is fixed for 2 years at 6.00%, then reverts to a variable rate of 8.00% for 23 years. Monthly payments would be about £1,256 for 24 months and £1,547 for 276 months. The total amount payable would be around £457,190, including interest and fees. The overall cost for comparison is 7.9% APRC. This example is illustrative only; your rate, APRC and monthly payments will depend on your circumstances.
Government schemes such as Deposit Unlock and First Homes (which offers a discount on new‑build properties) also help reduce the deposit needed. Shared ownership lets you buy part of the property and pay rent on the remainder. Eligibility criteria apply, so it’s important to check which schemes you qualify for.
Mortgage types explained
- Fixed‑rate mortgages lock in your interest rate for a set period (typically 2–5 years). This gives certainty over your monthly payments but means you won’t benefit if rates fall.
- Tracker mortgages follow the Bank of England base rate. Payments can go up or down; they often start lower than fixed rates but carry more risk.
- Discounted variable mortgages offer a discount off a lender’s standard variable rate (SVR). Payments vary if the lender changes its SVR.
- Offset mortgages link your savings account to your mortgage, reducing the interest you pay. They may be less suited to first‑time buyers with small deposits.
Getting ready for your first mortgage
Before you apply for a mortgage, it’s important to prepare:
- Check your credit report. Make sure your address history is correct and there are no unexpected issues. Pay off any outstanding debts and avoid taking out new credit in the months leading up to your application.
- Stay within your budget. Lenders will stress‑test your finances to ensure you can afford repayments even if rates rise. Make a realistic budget that includes future mortgage payments, utilities, council tax and everyday living costs.
- Gather paperwork. You’ll need proof of identity, recent payslips or tax returns (if self‑employed), bank statements and details of any debts.
- Consider professional advice. A mortgage broker can help you navigate hundreds of products and work out which type of mortgage and term suits your situation.
Key takeaways & call to action
- A bigger deposit generally means a lower interest rate and monthly payment.
- There are options for buyers with small deposits, including 95% LTV mortgages and family‑assisted schemes.
- Fixed, tracker and discounted mortgages each have pros and cons; choose based on your appetite for risk and need for certainty.
- Representative examples with APRC are required when discussing rates to ensure you understand the total cost of borrowing.
Ready to explore your first‑time buyer options?
Book a free mortgage review. A qualified adviser can help you understand how much you could borrow, compare deals tailored to first‑time buyer mortgages and check whether you qualify for low‑deposit schemes.
Your home may be repossessed if you do not keep up repayments on your mortgage.