If you’re aiming to own your first home this year, but are struggling to save a large deposit, there’s potentially good news. The 95% mortgage has made a comeback...

After a period of cautious lending due to economic uncertainty, more lenders are now offering low-deposit options, giving first-time buyers a crucial leg up onto the property ladder.

Let’s look at what a 95% mortgage really means to your financial planning, and explore the pros and cons…

What is a 95% mortgage?

A 95% mortgage essentially means you borrow 95% of the property’s value and put down just 5% as a deposit. For example, if you’re buying a home for £250,000, you would only need a £12,500 deposit. This could be a serious game-changer for many first time buyers who can afford monthly repayments but struggle to save tens of thousands of pounds for a deposit.

Why are 95% mortgages back?

The economic pressures of the last decade made lenders reconsider offering low deposit mortgages, but it now seems several factors have contributed to their return:

• Government support schemes, such as the Mortgage Guarantee Scheme (which has been extended into 2025), have encouraged lenders to offer high loan to value (LTV) products by reducing their risk
• The housing market has stabilised, and while property prices remain high, inflation has eased, and lenders are regaining confidence
• Demand from first-time buyers has remained strong, prompting lenders to cater to this segment with more competitive products.

And, as a result, we're seeing more banks and building societies reintroducing 95% deals, some with surprisingly attractive rates.

The pros and cons of a 95% mortgage

Getting a mortgage is a really big decision, likely representing your biggest ever financial commitment, so it’s important to consider all the pros and cons of a high LTV mortgage such as this.

Pros:

• Lower upfront cost: You don’t need to wait years to build up a large deposit
• Faster route to homeownership: Especially helpful if you’re currently renting and watching prices rise
• More options than before: The whole-of-market approach gives you access to specialist lenders who may offer more flexible criteria.

Cons:

• Higher interest rates: Typically, the smaller your deposit, the higher the rate you’ll pay
• Stricter affordability checks: Lenders want to be sure you can manage repayments, especially with rates still higher than in the pre-2020 era
• Risk of negative equity: If house prices fall, you could owe more than your home is worth.

How to improve your chances of approval

If you’re considering a 95% mortgage, here are a few steps to boost your application:

• Check your credit score* – and improve it if necessary by reducing debts and paying on time
• Provide proof of stable income – lenders will scrutinise your job status and income history. If you’re self-employed, you can still apply for a 95% mortgage, but you will need additional paperwork from your accountant
• Minimise other debts – credit card balances and personal loans can hurt your affordability rating
• Speak to a whole-of-market broker – they can match you with the most suitable lenders and help you navigate application requirements.

Last piece of advice regarding applying for a 95% mortgage

The return of 95% mortgages in 2025 could be a welcome development for first-time buyers. With the right advice and preparation, these products can be a viable route to homeownership, even in a high-cost market. As a whole-of-market broker, I can help you compare all the options and find the right deal for your circumstances, all completely fee-free**.

Thinking about buying your first home? Get in touch for free advice today.

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**NB: Whilst my advice, knowhow and administration of your case is free throughout the whole process, I do receive commission from the mortgage lender to cover the costs.