You can legally get a mortgage with a 5% deposit. But 5% deposits get the worst rates on the market, and a 10–15% deposit is usually the point where pricing improves meaningfully. There's no single "right" number — it's a trade-off between how long you save for and how much you pay in interest.
How your deposit size actually changes your mortgage
Every deposit size maps to a loan-to-value (LTV) — the percentage of the property's value you're borrowing. A 5% deposit means a 95% LTV mortgage; a 20% deposit means 80% LTV. Lenders price risk by LTV band, so the gap between a 95% LTV rate and a 60% LTV rate on the same day, with the same lender, is routinely well over a percentage point.
As of August 2026, the average two-year fixed rate across all LTV bands sits around 5.6%, and the average five-year fix is similar — but that average hides a wide spread. Buyers at 95% LTV are typically quoted noticeably more than buyers at 60% LTV, because the lender is more exposed if prices fall or you can't pay. On a £220,000 loan, even a 0.5 percentage point difference in rate is roughly £60–£70 a month, or over £700 a year.
What each deposit tier actually buys you
- 5% deposit (95% LTV): Gets you in the door, but with the smallest lender panel and the highest rates. Sensible if waiting to save more means waiting for house prices to rise faster than you can save.
- 10% deposit (90% LTV): A noticeably wider range of products opens up, usually with a visible rate improvement over 95% LTV.
- 15–20% deposit (85–80% LTV): This is where pricing tends to flatten out — the jump from 20% to 25% deposit rarely moves your rate as much as the jump from 5% to 15% did.
- 25%+ deposit (75% LTV or better): Access to the most competitive rates on the market, but the extra saving time has a real opportunity cost too — it isn't automatically the "right" choice.
The biggest LTV cliff-edges are usually at 95%, 90%, 85%, 80%, 75% and 60%. If your deposit sits just under one of these thresholds — say you can save 24% instead of 20% — check whether a small top-up (a few weeks of extra saving) tips you into a cheaper band. It sometimes pays for itself within the first year.
Stamp duty: the deposit-adjacent cost people forget
Deposit isn't the only upfront number that matters — Stamp Duty Land Tax (SDLT) can add thousands on top, and it's separate from your deposit. As a first-time buyer in England or Northern Ireland, current thresholds (unchanged since April 2025 and confirmed stable through 2026) are:
| Portion of price | Rate for first-time buyers |
|---|---|
| Up to £300,000 | 0% |
| £300,001 – £500,000 | 5% on the portion above £300,000 |
| Above £500,000 | No first-time buyer relief — standard rates apply to the whole purchase |
So a first-time buyer purchasing at £350,000 pays 5% on £50,000 — £2,500 — not 5% on the full price. Buy above £500,000 and you lose the relief entirely and pay standard rates from £125,001 upward, which can add a meaningful amount. Budget for this separately from your deposit; solicitors' fees, surveys and moving costs sit on top again.
The Lifetime ISA: still the strongest tool for building a deposit
If you're 18–39 and don't already have one, a Lifetime ISA (LISA) is usually the single best-value way to save for a first home. The government adds a 25% bonus on top of what you save, up to a £1,000 bonus per year:
- Save up to £4,000 per tax year, and HMRC adds 25% on top — up to £1,000 free per year.
- The account needs to have been open at least 12 months before the bonus can go toward a house purchase, so open one now even with a small amount if you're planning to buy in the next couple of years.
- The property must cost £450,000 or less — this cap is UK-wide and hasn't moved since 2017, so it matters more in higher-priced areas.
- You must be a genuine first-time buyer using a mortgage — LISA funds can't be used for a cash purchase.
- Withdraw the money for anything other than a first home (before age 60) and you pay a 25% government charge, which claws back the bonus and a slice of your own savings too — so don't treat it as a general emergency fund.
If the home you're buying costs even £1 over £450,000, you lose the ability to use your LISA penalty-free on that purchase — there's no tapering. Check this early if you're buying in a higher-priced area, and factor it into your search before you fall for a house you can't actually use the LISA on.
There's ongoing government consultation about eventually replacing the LISA with a new "First-Time Buyer ISA" — but as of August 2026 no changes are law, existing rules apply, and any change is not expected before 2028 at the earliest. It's safe to open and use a LISA today.
Other ways to close the gap
- Gifted deposits: Common and lender-accepted, but you'll need a signed letter from the giver confirming it's a gift, not a loan, with no stake in the property expected in return.
- Shared Ownership: Buy a share of a property (typically 10–75%) and pay rent on the rest — deposits are calculated on your share, not the full property value, which can bring the upfront figure down substantially.
- Joint borrower, sole proprietor: A family member's income can support your affordability without them being named on the property title — worth discussing with a broker if affordability, not deposit, is your bigger constraint.