5% deposit mortgages - how they work
Caz Blake-Symes • March 4, 2021
Full details on the Government scheme and who is eligible

A new mortgage scheme for homebuyers with a low deposit has been announced in the Budget. The Chancellor Rishi Sunak unveiled details of the scheme, which is designed to help those with a 5% deposit get accepted for a mortgage with the Government backing part of the loan.
How will the scheme work?
Under the scheme, first-time buyers, home movers and previous homeowners with a 5% deposit will once again have access to 95% loan-to-value mortgages (meaning the loan is for 95% of the property's value).
- The 95% mortgage will operate as any standard mortgage would for you, the buyer.
- For the mortgage lender however, the scheme guarantees that the Government will shoulder some of the cost if the lender lost money. Eg, if the borrower had failed to keep up with mortgage payments and the property was repossessed, but the subsequent property sale did not recoup the outstanding mortgage amount.
- The scheme will open next month and run until December 2022.
The scheme is similar to the 5% Help to Buy Government-backed mortgage scheme, which operated between 2013 and 2017. Any lender that is taking part in the scheme will have to offer a five-year fixed mortgage as part of their range of 95% LTV products.
Since the onset of coronavirus, 95% mortgages have all but disappeared from the market – leaving many potential homeowners stranded. This scheme is therefore designed to encourage more lenders to re-enter the 95% market.
Which buyers can take part in the scheme?
Any buyer with a small deposit can get one of these Government-backed mortgages. They are NOT restricted to first-time buyers but can be used by anybody buying a main home, including previous homeowners and home movers. In brief, here is the eligibility criteria:
• You must be buying a main residential home in the UK. So, these mortgages can't be used for second homes or buy-to-let properties.
• The property must be worth £600,000 or less. You will not be able to apply if the property costs in excess of this.
• You must have a deposit equivalent to between 5% and 9% of the property's purchase price. That means you will have a mortgage LTV between 91% and 95%.
• You must apply for a capital repayment mortgage. This means that you will not be able to apply for an interest-only mortgage.
• You will need to pass a lender's normal mortgage affordability criteria.
Which lenders will be offering these mortgages and how do I get one?
Several of the UK's biggest mortgage lenders have already signed up to take part in the scheme from April. These include:
• Lloyds, NatWest, Santander, Barclays and HSBC.
• Other lenders are expected to follow, including Virgin Money. We will be working with all lenders as this offer develops
If you have any queries whatsoever please contact your Adviser or one of our experienced Admin team who will be delighted to help you.
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Email info@swmortgages.com

Sky high house prices, high cost of living, student loans and rising rent costs mean that getting on the property ladder is challenging. But the desire to own a home remains strong for many young adults.
Now, the affectionately known ‘bank of mum and dad’ (or bank of other family members) may wish to lend or give money for deposits and other house purchase costs. Our expert Mortgage Advisers will be able to discuss all options available to suit your specific family’s situation.
Adapted from Zoopla’s April 2025 Housing report I mage: The analysis uses average house prices from the house price index and for first-time buyers to assess mortgage payments at different mortgage rates applied to a 30- year mortgage, at different loan-to-values. One emerging trend that we expect to positively support market activity in the coming months is a relaxation in how lenders assess the affordability of new mortgages. While buyers focus on the mortgage rate they will pay, lenders also check whether the borrower can afford a 'stressed mortgage rate' at a higher level than the borrower will pay. While the average 5-year fixed rate mortgage is around 4.5% today, many lenders are currently 'stress testing' affordability at 8-9%. This makes it harder to secure a mortgage without a large deposit. If average mortgage stress rates were to return to pre-2022 levels of 6.5% to 7%, this would deliver a 15-20% boost to buying power. An average first-time buyer with mortgage repayments of £1,020pcm at a 4.5% mortgage rate would typically have to prove they could afford monthly repayments of £1,550pcm at an 8.5% stress rate. If the stress testing is relaxed to 6.5%, repayments would fall to £1,275pcm, boosting buying power. It's a similar pattern for the average homeowner, while the actual impact will vary by lender and type of borrower. This change would consequently supporting demand and sales volumes, helping to clear the stock of homes for sale, rather than boosting house prices. Other existing rules and regulations that remain in place will continue to impact the availability of mortgage finance. Comment from Phil Clark “This is potentially very exciting news and will give borrowers a greater choice of products if these rules are relaxed. Regardless of whether you are a First-time Buyer, Looking to move, remortgage or invest in property, there are a huge range of competitive mortgage deals on the market. I will be delighted to discuss your specific requirements and offer you the most suitable deal!” Please call Phil on 0117 3251511 or email info@swmortgages.com For more information about the Mortgage and Protection products we offer, please visit www.bristolmortgagesonline.com Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
Here at Bristol, Bath and Exeter Mortgages Online, we understand that getting your first mortgage, or even a remortgage, especially if your circumstances have changed, may look like an impossible task, but we are here to help.
We hold your hand from your initial enquiry through to the completion of your purchase. It's not that tricky and there are ways you can improve your odds and boost your chances of a successful mortgage application.