For many years, the “normal” entry point for first time buyers has been a 5% deposit.
That’s still very much available and often a sensible benchmark. However, we’re now seeing lenders reintroduce products that require significantly less upfront cash than that traditional 5%.
Some lenders are now offering mortgage products structured around very low cash deposits, including:
- Options requiring a minimum cash deposit from just £5,000, meaning up to 99% loan to value is available
- Schemes where family savings can be used as security instead of gifting money
On the surface, that’s positive. Saving a 5% deposit can take time, particularly with rising rents and living costs. Lowering the cash barrier potentially brings home ownership forward for some buyers.
But as ever, the headline isn’t the whole story.
Low Cash Doesn’t Mean Low Cost
While these products reduce the amount of savings required, they typically:
- Come with higher interest rates
- Result in higher monthly payments
- Leave less equity buffer at the outset
For example, moving from a very low deposit to 5% or 10% can sometimes make a noticeable difference to the rate available and the overall cost over a fixed period.
So, the real question isn’t simply:
“What’s the minimum I need?”
It’s:
“What gives me the strongest position both now and over the next few years?”
Where Family Can Help
We’re also seeing continued interest in family-supported arrangements.
Rather than gifting money outright, a family member can place savings into a linked account as security for a set period. This can allow a buyer to purchase with little or no deposit of their own, subject to affordability.
For some families, this feels more comfortable than an outright gift, as the funds are returned after the agreed term (assuming payments are maintained).
Our View
It’s encouraging to see lenders showing more flexibility again. More choice in the market is always welcome.
However, lower cash deposit products are best viewed as tools, not shortcuts. In the right circumstances, they can work very well. In others, waiting to build a slightly stronger deposit may put you in a better long-term position.
As always, the right answer depends on individual circumstances, income, affordability, credit profile and future plans.
If you’re unsure what deposit level makes sense for you, we’re happy to run through the different scenarios and help you make an informed decision.
Contact Barlow Irvin Financial Services‘ team of award-winning mortgage experts on 01204 208 001.
As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.