Saving a sizeable deposit isn’t easy (especially when groceries now cost roughly the same as a city break). The good news? Buying a home with just a 5% deposit is still possible thanks to a mix of 95% mortgages and the UK’s permanent mortgage guarantee scheme.
Here’s what you need to know before you dive in.
What is a 95% mortgage?
A 95% mortgage lets you buy a home with a 5% deposit.
For example:
- Home price: £250,000
- Deposit: £12,500 (5%)
- Mortgage: £237,500 (95%)
These products can be great for first-time buyers and movers who have steady income but haven’t managed to save a large deposit.
What is the current mortgage guarantee scheme?
In July 2025, the UK government introduced a new, permanent mortgage guarantee scheme (also known as Freedom to Buy). Its purpose is simple: Encourage lenders to keep offering 95% mortgages by giving them partial protection if a borrower defaults.
A few key points:
- It’s for lenders, not borrowers. You don’t apply for anything extra.
- It supports 91–95% Loan-to-Value (LTV) mortgages on homes up to £600,000.
- Applies to first-time buyers and home movers buying a main residence.
- Not available on buy-to-let, second homes, or company purchases.
- Mortgages must be repayment, not interest-only.
Because lenders get some reassurance from the government, more of them are willing to offer high-LTV deals, even when the wider market is a bit wobbly.
How do you get a 95% mortgage?
You don’t “apply to the scheme”. You simply apply for a standard mortgage with a participating lender.
To qualify, you’ll generally need:
- A 5% to 9.99% deposit.
- A UK property under £600,000.
- A repayment mortgage.
- To be over 18 and buying your main home.
- A credit profile that shows you can manage repayments.
- Income that passes the lender’s affordability checks and stress tests.
Think of it as a normal mortgage application, just with a smaller deposit.
Is interest higher on a 95% mortgage?
Usually, yes. Lenders charge more for 95% mortgages because the risk (and the loan amount) is higher. Expect rates often higher than 90% or 80% mortgages, and differences that can range from around 0.5% to 1% or more, depending on the market and lender.
Even so, for many buyers the trade-off is worth it: you can get on the ladder sooner without waiting years to grow your savings.
Pros and Cons of 95% mortgages
| Pros
|
Cons
| | | — | — | — | |
Get on the ladder sooner: A 5% deposit is far more achievable than 10–20% for many buyers.
|
Higher monthly repayments: More borrowing + higher rates = a pricier mortgage.
| | |
Wider lender choice in 2026: With the new scheme now permanent, more lenders are expected to offer high-LTV options consistently
|
Greater risk of negative equity: If property prices dip, your small equity buffer disappears quickly.
| | |
Buy the home you need, not the one you can barely afford today: Useful for buyers whose incomes are growing but savings are still catching up.
|
Harder to remortgage later: If you don’t build equity fast enough, your next deal may be limited.
| |
Is a 95% mortgage right for you?
It can be, especially if:
- You have strong, steady income
- You can comfortably manage repayments
- You don’t want to spend years saving an extra 5% to 10%
- You’d benefit from getting into a stable home sooner
It may not be ideal if:
- Your income is variable or unpredictable
- You’re stretching your budget to the limit
- You’re likely to move again in the short term
- You’re worried about house prices falling
95% mortgage alternatives to consider
A 95% mortgage isn’t the only route to homeownership in 2026.
**Save a bigger deposit
**Even moving from 5% to 10% can unlock noticeably lower rates.
**Shared Ownership
**Buy part of a property and pay rent on the rest. Often requires a smaller deposit too.
**Family-assist or “springboard” mortgages
**A relative temporarily secures your mortgage with savings, helping you access better rates.
**Lifetime ISA (LISA)
**Boost your deposit with a 25% government top-up on savings (up to limits).
In a nutshell
A 95% mortgage can be a powerful stepping stone for buyers who are ready to own but don’t have a big deposit sitting in the bank. And with the government’s permanent mortgage guarantee scheme supporting lenders behind the scenes, high-LTV options look set to remain part of the market for the long term.
Just make sure to weigh the costs carefully, check the latest rates, and speak to a broker who can help you find the right deal for your situation.
--
Remember: This guide provides general information only. For advice specific to your situation, consider speaking to an independent financial adviser.FAQs
Can I still get a 95% mortgage in 2026?
Yes. Many lenders continue to offer 95% mortgages in 2026, and the government's new permanent mortgage guarantee scheme helps keep these high-LTV deals available.
Do I apply directly to the mortgage guarantee scheme?
No. The scheme is for lenders, not borrowers. You simply apply for a 95% mortgage as normal. If your lender uses the scheme, that happens in the background.
How much deposit do I need for a 95% mortgage?
You'll usually need a minimum 5% deposit, though some lenders may ask for slightly more depending on the property and your credit profile.
Is it harder to get approved for a 95% mortgage?
Lenders may apply stricter affordability checks because you're borrowing a larger percentage of the property's value. A steady income, good credit history, and sensible outgoings help your chances.
Will a 95% mortgage have a higher interest rate?
Typically, yes. High-LTV mortgages often come with higher rates because they're riskier for lenders. The difference can be around 0.5% to 1% or more compared to lower-LTV deals.
Can I use a 95% mortgage on any property?
You can use it to buy a main residential home valued up to £600,000. It won't apply to second homes, buy-to-let properties, or company purchases.
Does the government guarantee protect me if I can't pay?
No. The guarantee protects the lender, not the borrower. You're still fully responsible for the mortgage and repayments.
What are the risks of taking out a 95% mortgage?
The main risks include higher monthly payments, reduced remortgage options, and a greater chance of negative equity if house prices fall.
Are there alternatives to a 95% mortgage?
Yes. Options include saving a bigger deposit, Shared Ownership, family-assist mortgages, or using a Lifetime ISA to boost your savings.
Is the mortgage guarantee scheme replacing Help to Buy?
No. Help to Buy has closed to new applications. The mortgage guarantee scheme is a different policy designed to support lenders in offering low-deposit mortgages.
