The minimum deposit and what it costs
Most mainstream mortgage lenders will lend to residential buyers with a 5 percent deposit — a 95 percent loan-to-value (LTV) mortgage. On a £250,000 property, this means a minimum deposit of £12,500. However, the interest rate on a 95 percent LTV mortgage is significantly higher than on a 90 percent or 85 percent LTV mortgage. In 2026, the rate premium for 95 percent versus 85 percent LTV mortgages is typically 0.7 to 1.2 percentage points, which on a £230,000 mortgage adds approximately £100 to £175 per month to your repayments.
The question is not just 'can I afford the deposit?' but 'can I afford the higher mortgage payments that come with a smaller deposit?' For many buyers, saving an extra 5 percent to get from 95 to 90 percent LTV is the most efficient use of additional savings — the reduction in monthly payments often repays the extra saving within 3 to 4 years.
Deposit size and mortgage rates: the practical impact
Mortgage rates step down at key LTV thresholds: 95%, 90%, 85%, 80%, 75%, and 60%. The largest improvements in rate typically occur between 95% and 90%, and between 75% and 60% LTV. In 2026, a five-year fixed rate for a 75% LTV mortgage is roughly 4.0 to 4.5%. The equivalent at 90% LTV is typically 4.6 to 5.2%. At 95% LTV, rates often start at 5.2 to 5.8% or higher.
If you are deciding between saving more deposit and getting on the property ladder sooner, model both scenarios. Entering the market earlier at 90% LTV instead of waiting to reach 85% LTV saves 12 to 18 months of saving but costs more in mortgage interest. In a rising market, the capital appreciation during those extra months of saving may exceed the interest premium. In a flat or falling market, waiting to save more deposit carries less opportunity cost.
First-time buyer deposit help
The Lifetime ISA (LISA) is the most tax-efficient deposit savings vehicle for first-time buyers under 40. You can save up to £4,000 per year and receive a 25 percent government bonus — up to £1,000 per year. Both members of a couple can hold individual LISAs, giving a combined bonus of up to £2,000 per year. The LISA can only be used for properties priced at £450,000 or less, and you must be a first-time buyer using it with a repayment mortgage. Withdrawals for any other purpose before age 60 incur a 25 percent charge which returns the bonus and adds a penalty.
The Mortgage Guarantee Scheme, renewed periodically by the government, supports lenders offering 95% LTV mortgages by underwriting some of the lender risk. This keeps the 5% deposit option available even when lenders might otherwise withdraw from this market due to risk appetite. Check with a mortgage broker whether this scheme is currently available when you are ready to apply.
Gifted deposits: what lenders require
If part or all of your deposit is a gift from family, most lenders will accept it but require a signed gifted deposit letter confirming the money is a gift (not a loan), the giver's relationship to the borrower, and that the giver has no interest in the property. Some lenders also require proof of the donor's funds — a bank statement showing where the money came from. Your solicitor and mortgage broker will guide you on the specific requirements for your lender.
There are no stamp duty or tax implications for the buyer when receiving a gifted deposit. However, inheritance tax may be relevant for the donor if they die within 7 years of making the gift and the total gifts exceed the annual exemption. For large parental gifts, the donor should take independent financial advice before transferring funds.
Frequently asked questions
Can I buy a house with a 5 percent deposit?
Yes — 95% LTV mortgages are available from a number of mainstream lenders in 2026. The rate is higher than at lower LTV ratios, and some lenders have tighter credit scoring requirements for 95% products. You will also need to demonstrate that you can afford the mortgage payments at a stressed interest rate (typically 2 to 3 percentage points above the product rate).
Does a bigger deposit mean cheaper monthly payments?
Yes, in two ways. First, you borrow less, so you pay less in absolute terms. Second, a higher deposit gives a lower LTV which qualifies you for better (lower) interest rates. Both effects reduce your monthly payment. The difference between a 10% and 20% deposit on a £300,000 purchase at current rates can be £200 to £350 per month in mortgage payments.