The minimum deposit for a first home in 2026
In the UK, the absolute minimum deposit for a residential mortgage is 5% of the property's purchase price. On a property costing £250,000, that means you would need at least £12,500 upfront. However, while 5% is the floor, it is not necessarily the sweet spot. The size of your deposit directly influences the interest rate you are offered, the range of lenders willing to work with you, and your monthly repayments over the life of the mortgage.
Most lenders categorise deposits by loan-to-value (LTV) bands. At 95% LTV (a 5% deposit), you are in the highest risk bracket and will pay the highest rates. Move to 90% LTV (10% deposit) and rates drop noticeably. The most competitive rates tend to kick in at 75% LTV (25% deposit) or below, but for first time buyers, even reaching the 85% or 80% threshold can make a meaningful difference.
How your deposit size affects your mortgage rate
Lenders price risk into their products. A larger deposit means less risk for the lender, which translates directly into lower interest rates for you. Here is a rough guide to how deposit size affects typical rates in 2026:
- 5% deposit (95% LTV): Expect rates around 1.0–1.5% higher than the best available deals. Fewer lenders operate at this level, so choice is limited.
- 10% deposit (90% LTV): A significant improvement. You will access most mainstream lenders and rates drop considerably compared to 95% LTV.
- 15% deposit (85% LTV): Another meaningful step down in rates, and you will qualify for a much wider range of products.
- 20–25% deposit (75–80% LTV): This is where the most competitive rates live. If you can reach this level, you will benefit from the lowest pricing available.
To put this in real terms, on a £250,000 property with a 25-year repayment mortgage, the difference between a 95% LTV rate and an 85% LTV rate could save you £100–£200 per month. Over a five-year fixed term, that adds up to thousands of pounds.
What counts towards your deposit
Your deposit can come from several sources, and lenders will ask about the origin of the funds during the application process. Acceptable sources include:
- Personal savings: The most straightforward option. Regular savings, ISAs, and cash holdings all count.
- Gifted deposits: Many first time buyers receive financial help from family. Lenders accept gifted deposits but will require a signed letter from the gifter confirming the money is a gift, not a loan, and that they have no interest in the property.
- Lifetime ISA bonus: The 25% government bonus on a Lifetime ISA counts towards your deposit, up to a maximum property value of £450,000.
- Inheritance: Accepted with appropriate documentation.
- Sale of assets: Proceeds from selling a car, investments, or other assets can form part of your deposit.
What lenders will not accept is a deposit funded by an unsecured loan, credit card, or any form of borrowing that is not disclosed. Anti-money laundering regulations mean lenders must verify the source of your deposit, so be prepared to provide bank statements and a clear paper trail.
Government schemes that help with your deposit
Lifetime ISA
The Lifetime ISA remains one of the most valuable tools for first time buyers in 2026. You can save up to £4,000 per year and the government adds a 25% bonus — that is up to £1,000 free each year. You must be aged 18–39 to open one, and the property must cost £450,000 or less. The catch is that withdrawing for any purpose other than buying your first home or retirement incurs a 25% penalty on the withdrawal amount, which means you actually lose money.
First Homes scheme
The First Homes scheme offers newly built homes to first time buyers at a discount of at least 30% below market value. The discount is passed on to future buyers, so it stays affordable long term. Eligibility criteria include a household income cap (typically £80,000, or £90,000 in London) and the discounted price must be no more than £250,000 (£420,000 in London).
Shared ownership
With shared ownership, you buy a share of a property (typically 25–75%) and pay rent on the remainder. This significantly reduces the deposit you need — you only need a deposit on the share you are purchasing. On a £250,000 property where you buy a 25% share (£62,500), a 5% deposit would be just £3,125.
How to save for your deposit faster
Building a deposit takes time, but there are practical steps to accelerate the process:
- Open a Lifetime ISA immediately: Even small monthly contributions benefit from the 25% bonus. Starting early maximises the government top-up.
- Set up a dedicated savings account: Keep your deposit fund separate from everyday spending. An easy-access savings account or regular saver with a competitive rate keeps your money working.
- Automate your savings: Set up a standing order on payday so saving happens before spending.
- Review your outgoings: Audit subscriptions, switch energy providers, and look for areas where you can redirect money towards your deposit.
- Consider the Bank of Mum and Dad: If family support is available, a gifted deposit can bridge the gap. Around 50% of first time buyers in the UK receive some form of family help.
Does a bigger deposit mean you can borrow more?
Not directly. How much you can borrow is primarily determined by your income and outgoings through the lender's affordability assessment. Most lenders offer between 4 and 4.5 times your gross annual income, though some specialist lenders go up to 5.5 times for higher earners or certain professions.
However, a larger deposit increases the total property value you can afford. If you earn £40,000 and a lender offers 4.5 times income, you can borrow £180,000. With a 5% deposit (£9,474), you could buy a property worth around £189,474. With a 10% deposit (£20,000), you could afford a property worth £200,000.
Should you wait to save more or buy now?
This is one of the most common questions first time buyers face, and there is no universal answer. Waiting to save a larger deposit means better rates and lower monthly payments, but property prices may rise in the meantime, potentially outpacing your savings.
If you can comfortably afford the monthly repayments at 95% LTV and find a suitable property, buying sooner means you start building equity rather than paying rent. After two to five years, you can remortgage at a lower LTV as your equity grows through repayments and any property price increases.
A first time buyer mortgage broker can model both scenarios for you, showing exactly what you would pay now versus waiting, and help you decide which approach makes better financial sense for your situation.
How a broker helps first time buyers with deposits
A specialist broker understands which lenders are most competitive at each LTV band and can find you the best rate for your exact deposit level. They also know which lenders are more flexible with gifted deposits, which accept Lifetime ISA bonuses smoothly, and which have the most favourable affordability criteria for first time buyers.
If you are unsure whether to buy now or save more, a broker can run the numbers for both scenarios. They can also identify lenders offering cashback deals or fee-free products that effectively reduce your upfront costs. Get Matched Free with an FCA-regulated broker who specialises in first time buyer mortgages.