Please note: This blog reflects information accurate as of 07/09/26 but may be outdated by the time you read it. It does not constitute financial advice; please consult a broker to understand your personal situation.
The 5% deposit mortgage has taken a beating this year. March saw the biggest shake-up in the 95% LTV market since the 2022 mini-budget, with over 200 products pulled almost overnight and average rates climbing to 6%. This product has often been viewed as the first rung on the property ladder, so seeing rates as high as 6% sent a clear signal about the risk banks believed they were taking on.
Despite this, the industry hasn't turned its back on 95% LTV products. Many high street banks, including NatWest, Santander and HSBC, are still offering them, propped up by the 95% Mortgage Guarantee Scheme. Rates have also eased slightly since the spring turmoil.
The answer: mortgage supply is still there. Lenders are giving first-time buyers a route onto the ladder with 5% deposits, but with less deposit comes a higher interest rate to protect the bank. For anyone considering a 95% LTV mortgage, treat today's rate as exactly that: today's rate, not a guarantee.
The core trade-off
Cost: 95% LTV rates run roughly 1.0 to 1.5% higher than the best available deals, as lenders price in the extra risk. (Source)
Availability: products for first-time buyers are still on the market, with the 95% Mortgage Guarantee Scheme keeping the door open. (Source)
Affordability cap: many brokers believe the affordability cap matters more than the deposit itself. The first barrier is usually income multiples, roughly 4.5x salary at 95% LTV, rather than the size of the deposit.
Negative equity risk: the main downside is how little equity you start with. At only 5%, even a small dip in the market could leave you owing the bank more than your home is worth.
So why do people still do it?
With 95% mortgage products becoming harder to find and less equity built in from day one, why would people still choose this route? It comes down to the alternative.
Across England, and especially the south, renting remains more expensive than buying for most young people, making it the stronger financial decision even at a higher rate.
With the more common products (2- and 5-year fixes), the cost doesn’t rise year by year like renting, and every payment builds equity you'll eventually get something back from. For a lot of people, that combination still makes homeownership the goal worth reaching for.
A middle ground
A 10% deposit is the middle ground for first-time buyers wanting a better footing. More equity means more of a buffer if the market shifts, and it's still within reach for many young people in certain areas.
If 5% is all you can put down and the product works for your circumstances, it still makes sense to go ahead. With renting costing more than buying in most parts of the country, and the market continuing to shift, buying remains the better option in most situations.
Ready to find out what a 5% deposit could mean for you?
Hello Mortgage searches the whole market, not just the high street names, to find the deal that actually suits your circumstances.
Get in touch with our team today for a free, no-obligation chat about your options.
Email: hello@hellomortgage.co.uk
Tel: 0800 292 2557
Disclaimer: Your home may be repossessed if you do not keep up with your mortgage payments.
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