Small-deposit mortgages are making a comeback
Adapted from our September 2026 newsletter
Struggling to save a huge deposit for your first home? New figures show mortgages for buyers with smaller deposits are accounting for a bigger share of lending. But a 5% deposit does not necessarily mean buying will be affordable, so here is what first-time buyers need to know.
For many aspiring homeowners, it is not the monthly mortgage payment that first stops them in their tracks. It is the deposit.
Saving tens of thousands of pounds while paying rent and everyday living costs can make buying a first home feel frustratingly distant.
But there is some encouraging news for those who have been struggling to build a large deposit.
The latest Bank of England mortgage lending figures show that 8.4% of gross mortgage advances in the second quarter of 2026 were made at loan-to-value ratios above 90%.
It is also up from 8% in the first three months of this year and 7% a year earlier.
In simple terms, mortgages involving relatively small deposits are playing a bigger role in the market than they have for many years.
For first-time buyers who assumed they would need a substantial deposit before home ownership was even worth considering, that makes this an interesting development.
But there is an important distinction.
The 8.4% figure covers gross mortgage advances across the market. It is not a figure for first-time buyers alone.
So what does it actually tell us, and could a smaller deposit make buying a home more achievable?
What does ‘high LTV’ actually mean?
LTV stands for loan-to-value. It measures the mortgage as a percentage of the property’s value.
If a buyer has a 10% deposit and borrows the remaining 90%, that would ordinarily be described as a 90% LTV mortgage.
A buyer putting down 5% and borrowing 95% would ordinarily require a 95% LTV mortgage.
Why this could matter to first-time buyers
The deposit remains one of the most formidable barriers facing people trying to buy their first home.
The latest English Housing Survey found that recent first-time buyers in England had a median deposit of £36,500 in 2024-25.
There is another revealing figure.
Around 59% of recent first-time buyers in the survey put down less than 20% of their property’s purchase price, including 16%.
In other words, buying a first home does not always require the enormous deposit that prospective buyers may imagine.
That does not mean everybody with a 5% or 10% deposit will qualify for a mortgage. But it does mean it can be worth establishing what is actually possible before assuming the size of your deposit automatically rules you out.
Government support for 5% deposit mortgages is now permanent
There has also been a significant change behind the scenes.
Since July 2025, the Government has operated a permanent Mortgage Guarantee Scheme, designed to support the availability of mortgages between 91% and 95% LTV.
HM Treasury says the scheme can enable eligible first-time buyers and home movers across the UK to purchase a property with a deposit as small as 5%.
The scheme works by giving participating lenders a government-backed guarantee against a portion of potential losses on qualifying mortgages.
Borrowers still need to meet the lender’s individual criteria and affordability assessment.
Nor does every mortgage between 90% and 95% LTV necessarily have to be offered through the Government scheme.
First-time buyers remain a big part of mortgage lending
First-time buyers themselves continue to represent a substantial part of the mortgage market.
FCA data show that first-time buyers accounted for 27.3% of total gross mortgage advances in the second quarter of 2026.
Home movers accounted for a further 28.8%.
That does not mean conditions have suddenly become easy for new buyers.
Affordability remains a major hurdle, and having enough cash for a deposit is only one part of the equation.
But the rise in high-LTV lending is evidence that borrowers with smaller deposits have not disappeared from the mortgage market.
The catch with borrowing 95%
A small deposit can get you to the starting line sooner, but there are trade-offs.
The first is straightforward: the more of the property price you borrow, the larger your mortgage debt will be.
Mortgage pricing can also vary significantly according to LTV. The rate available to somebody borrowing 95% of a property’s value may be different from the rate available to a borrower with considerably more equity.
This is why focusing only on the minimum deposit can be misleading.
Neither route is automatically right.
Small deposits also leave less room if property prices fall
Buyers also need to think about equity.
If you purchase a property with only a small deposit, you begin with relatively little equity of your own.
A mortgage needs to be affordable not just on completion day, but throughout the period you expect to hold it.
The existence of a 95% LTV mortgage does not mean somebody with a 5% deposit automatically qualifies.
Mortgage lenders are required to assess whether a borrower can afford to repay the money being borrowed.
The FCA’s responsible lending rules require firms to consider whether a customer will be able to repay the sums borrowed and the interest due.
Income, regular expenditure and existing borrowing can therefore all influence affordability.
Individual lender criteria can also differ.
Your employment circumstances, credit history, the type of property you are purchasing and other elements of the application may affect the mortgages available.
This is why two first-time buyers with identical deposits and looking at similarly priced homes could potentially have very different borrowing options.
Longer mortgage terms are already becoming more common
There is another sign of how first-time buyers are adapting to affordability pressures.
The English Housing Survey found that 62% of recent first-time buyers with mortgages had taken repayment terms of 30 years or more in 2024-25.
A longer term can reduce the initial monthly repayment on a repayment mortgage, all else being equal, but it also generally means paying interest for longer and potentially paying more interest overall.
It should therefore be considered as part of the overall cost and suitability of the mortgage, rather than simply as a way to achieve a lower monthly figure.
As mortgage brokers, we can look at your deposit, income, commitments and circumstances and explain the mortgage options that may be available to you.
That can also help you understand whether using your current deposit or continuing to save could make a meaningful difference to your options.
What to do next
Russell Green will personally deal with your enquiry.
Tel 01934 442023
Email russell@westonmortgagesonline.com
Complete a form via our website www.westonmortgagesonline.com
Our initial mortgage consultation is free and with no obligation; should you proceed to an application, there will usually be a fee for mortgage advice. The precise amount of the fee will depend upon your circumstances, but will range from £ 290 to £490, and this will be discussed and agreed with you at the earliest opportunity.
Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
Think carefully before securing other debts against your home/property.
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All the information in this article is correct as of the publish date 24th September 2026. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content, and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.
