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Can You Really Buy a Home With a 5% Deposit Mortgage in the UK in 2026?

Many buyers are told that the UK’s 5% Deposit Mortgage Scheme is their shortcut onto the property ladder. What is often not explained clearly is who actually qualifies, where the real risks sit, and why some applicants still fail despite the scheme existing.

Before relying on a mortgage with such a small deposit, it’s important to understand how the scheme works in practice, not just in headline terms.

What Is the 5% Deposit Mortgage Guarantee Scheme?

The UK Government introduced the Mortgage Guarantee Scheme to encourage lenders to offer high loan-to-value (LTV) residential mortgages.

Under the scheme, eligible buyers may be able to purchase a main residence with a deposit as low as 5%, borrowing up to 95% LTV. The government provides a guarantee to participating lenders on part of the mortgage between 91% and 95% LTV, reducing lender risk and supporting product availability.

Importantly, the mortgage guarantee scheme is for the lender’s benefit, not the borrower’s.

How the Scheme Works in Practice

From a borrower’s perspective, applying for a mortgage under the scheme looks similar to a standard residential mortgage application. You apply directly through a participating lender and must still meet affordability, income, and credit requirements.

From a lender’s perspective, the government guarantee helps offset some of the risk associated with lending at very high LTVs. This may make them more willing to offer 95% LTV products — but it does not mean approval is automatic.

Lenders set their own criteria, interest rates, and product terms. As highlighted by independent consumer guidance, a 95% LTV mortgage under the scheme is not necessarily the cheapest option available.

Who the Scheme Is Actually For (and Who It Isn’t)

The scheme is typically suitable for:

First-time buyers who have saved a 5% deposit but struggle to access high-LTV products
Home movers with limited equity after selling a previous property
Buyers purchasing a main residence within the scheme’s property value limits

It is often unsuitable if:

You are buying a buy-to-let or second home
The property exceeds the applicable value cap
You have unstable income or fail lender affordability assessments
You expect to remortgage or move again in the short term

What Many Buyers Overlook

This is the part many guides don’t emphasise clearly:

The mortgage guarantee scheme does not protect you. If you fall into financial difficulty, your responsibilities remain unchanged.
Interest rates are usually higher at 95% LTV, which can significantly affect long-term cost.
Equity builds slowly, leaving less flexibility if property prices stagnate or fall.
Some buyers qualify on paper but fail lender stress tests in practice.

These factors explain why the scheme exists — and why it isn’t suitable for everyone.

Risks, Costs, and Trade-Offs

High LTV mortgages typically involve trade-offs:

Higher interest rates compared to 90% or 85% LTV products
Greater exposure to negative equity in a falling market
Reduced flexibility for early remortgaging or overpayments

Independent guidance consistently stresses that increasing your deposit — even from 5% to 10% — can materially improve rates and reduce long-term risk.

Common Questions Buyers Ask

Can you really get approved for a mortgage with a 5% deposit mortgage?
Yes, but approval depends on lender criteria, affordability checks, and credit profile — not the scheme alone.

Is the scheme only for first-time buyers?
No. It can also apply to home movers, provided eligibility criteria are met.

Is the Mortgage Guarantee Scheme still available in 2026?
The scheme has been positioned as a long-term measure, but availability and lender participation can change.

Why do some buyers fail even when the scheme exists?
Because the mortgage guarantee scheme supports lenders, not borrower affordability or creditworthiness.

Should You Consider a 5% Deposit Mortgage?

A mortgage with a 5% deposit can be a practical route onto the housing ladder — or an expensive mistake — depending on timing, lender choice, and long-term plans.

The scheme improves access, but it does not remove risk. The right decision usually comes down to understanding the full cost of borrowing and how the mortgage fits into your broader financial picture.

For this reason, independent advice from a mortgage broker experienced in high-LTV and government-backed products is often recommended.

Disclaimer

Information such as eligibility criteria, property value limits, lender participation, and scheme rules may change over time.
For up-to-date advice tailored to your personal circumstances, please contact PBSBrokers before making any financial decisions.