How much deposit do you actually need?

This one's for UK first-time buyers and anyone buying their first investment property in their own name. The honest answer is "5% gets you in, but every extra 5% makes the mortgage cheaper", and there's free government money on the table if you play the Lifetime ISA rules correctly. Here's the full picture, with the catches said out loud.

The short answer

The minimum deposit for a standard residential mortgage in the UK is 5% of the purchase price. On a £250,000 home that's £12,500. But 5% is the floor, not the target. Lenders price mortgages in loan-to-value (LTV) bands, and the less you borrow relative to the property's value, the cheaper the rate. Buying a whole property to let out in your own name? Expect lenders to want more: typically 25% down for buy-to-let (see the first buy-to-let guide).

5% vs 10% vs 25%: what actually changes

LTV is just the mortgage as a percentage of the property price. A £237,500 mortgage on a £250,000 home is 95% LTV: you put down 5%.

Lenders set their pricing at band thresholds, typically 95%, 90%, 85%, 80%, 75% and 60% LTV. Cross a threshold and you qualify for a cheaper shelf of products. The mechanics:

95% LTV (5% deposit): the most expensive band. The lender carries the most risk: if prices dip even slightly and they have to repossess, they can lose money. You pay for that risk in the rate.
90% LTV (10% deposit): usually the single biggest rate improvement per pound of extra deposit. Going from 5% to 10% down often does more for your monthly payment than any other 5% jump.
75% LTV (25% deposit): you're now a low-risk borrower and it shows in the pricing. This is also the territory where buy-to-let lending generally starts.
60% LTV and below: the best rates on the market live here. Mostly relevant to movers with equity, not first-timers.

We're deliberately not quoting rates: they change weekly and depend on you. The mechanics don't change: same house, same income, bigger deposit, cheaper money. A broker can show you the live band pricing for your situation.

The catch with 5%: you're more exposed to negative equity. If you buy at 95% LTV and prices fall 6%, you owe more than the house is worth. That's survivable if you stay put, but it can trap you when your fixed deal ends.

What the average first-time buyer actually puts down

Halifax's first-time buyer review (published February 2025, covering full-year 2024, the latest complete-year figures from a major lender) put the average UK first-time buyer deposit at £61,090 against an average first-time-buyer price of £311,034, roughly a 20% deposit. Later industry figures for 2025 land in the same ballpark, though the exact number moves around depending on whose data you use, so treat "about £60k / about 20%" as the honest number.

Don't let that average scare you off. It's dragged upwards by London (where average first-time deposits run well into six figures) and by people getting large family gifts. Plenty of people buy with 5 to 10% down. By late 2025, industry data showed more than a fifth (22%) of first-time buyers purchasing with deposits under £20,000, up from around 13% a year earlier.

The 95% mortgage safety net in 2026

The old mortgage guarantee scheme (2021 vintage) closed in June 2025. It was replaced by a permanent successor: the 2025 Mortgage Guarantee Scheme, available from July 2025 and still running as of July 2026. The government guarantees a slice of lenders' losses on 91 to 95% LTV loans, which keeps 5%-deposit mortgages on the shelves.

What the published scheme rules (3 July 2025) actually require:

The loan must be 91 to 95% LTV, a repayment mortgage (not interest-only), and a first-charge mortgage.
Residential property in the UK that at least one borrower intends to live in: no buy-to-let, no shared ownership or shared equity.
Standard affordability and credit checks apply. The guarantee protects the lender, not you.

Notably, the permanent scheme's published rules contain no property price cap (the old scheme's £600,000 limit is gone), though individual lenders set their own criteria. You don't apply to the scheme; you just apply for a 95% mortgage and the lender handles it behind the scenes. Some lenders also offer 95% deals outside the scheme entirely.

Lifetime ISA: free money with a trapdoor

The Lifetime ISA (LISA) is the best deposit-building tool going, if you fit the rules. Verified at gov.uk as of July 2026:

Open one between age 18 and 39 (first payment must go in before you turn 40).
Pay in up to £4,000 per tax year until you're 50.
The government adds a 25% bonus, up to £1,000 free per year.
Use it penalty-free for a first home costing £450,000 or less, bought with a mortgage, using a conveyancer, at least 12 months after your first payment into the account.
You must be a genuine first-time buyer, never owned property before.

Now the trapdoor: withdraw for any other reason (before age 60) and you pay a 25% government charge on the whole withdrawal. That sounds like it just claws back the bonus. It doesn't. It takes some of your own money too.

Worked example: the penalty maths

You pay in £4,000. Government adds 25%: £1,000. Pot = £5,000.
Life happens and you withdraw the lot for something that isn't a first home.
Charge: 25% of £5,000 = £1,250.
You walk away with £3,750, £250 less than you put in.

That's an effective 6.25% loss on your own money, before considering any interest or growth you'd have earned elsewhere. The 25% bonus on the way in and the 25% charge on the way out are not symmetrical, because the charge applies to a bigger number.

The other trap: the £450,000 cap. If your purchase price ends up at £450,001, you can't use the LISA penalty-free at all: it's not tapered. In much of London that cap is genuinely restrictive. If you might end up buying above it, think hard before locking money in.

Gifted deposits: the paperwork nobody warns you about

Family gifts fund a big chunk of first-time deposits. Lenders accept them, but on conditions:

It must be a true gift, not a loan. The giver signs a gifted deposit letter confirming there's no repayment expected and they'll hold no stake in the property. Most lenders only accept gifts from close family.
Anti-money-laundering checks apply to the giver, not just you. Under the Money Laundering Regulations 2017, your solicitor and lender must verify the source of funds. Expect your parent (or whoever) to hand over photo ID, proof of address, and bank statements showing where the money came from, sometimes months of them. If the money arrived in their account recently, they may be asked where that came from.
Start the paperwork early. Gifted-deposit AML checks are one of the most common causes of delay (see the conveyancing guide).
Side note for the giver: large gifts can have inheritance tax consequences if they die within 7 years (gov.uk covers the taper rules). Worth them getting advice.

Mistakes people make

Draining every penny into the deposit. You still need roughly £2,000 to £5,000+ for legal fees, surveys, searches and moving, plus any stamp duty (see the stamp duty guide). A 10% deposit with no cash left is worse than 9% with a buffer.
Missing an LTV band by a whisker. Putting down 9.7% prices you as a 95% LTV borrower. Find the extra 0.3% or negotiate the price down. Crossing the band is worth real money.
Raiding a LISA for a non-house emergency without doing the 6.25% maths above.
Opening a LISA less than 12 months before buying. The bonus is unusable for the purchase and early withdrawal triggers the penalty.
Disguising a family loan as a gift. Lenders and solicitors ask directly; lying on a mortgage application is fraud.
Assuming 5% deals will always be there. The guarantee scheme is now permanent, but individual lenders pull high-LTV products when markets wobble. If you're mortgage-ready, act while your paperwork is fresh.

Sources: gov.uk: Lifetime ISA · gov.uk: Withdrawing money from your Lifetime ISA · gov.uk: 2025 Mortgage Guarantee Scheme · 2025 Mortgage Guarantee Scheme Rules, 3 July 2025 (PDF) · Halifax first-time buyer review, Feb 2025 (Lloyds Banking Group) · Barclays Property Insights, Nov 2025 (deposit-size data) · Money Laundering Regulations 2017 (legislation.gov.uk) · gov.uk, Inheritance Tax: gifts

Education, not financial advice. For mortgage advice, speak to an FCA-authorised broker.

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