A 95% mortgage lets you buy with a deposit of 5% of the price. It gets you into a home sooner than saving 10%, but you borrow more, usually at a higher rate, and you start with very little equity. This page covers how these mortgages work, what the government’s guarantee does, and what the smaller deposit costs.
How a 95% mortgage works
The loan is 95% of the price or the lender’s valuation, whichever is lower; the 5% deposit is your money. The lender checks your income, outgoings and credit record, and tests whether you could still pay if rates rose, as for any mortgage (see how much you can borrow).
The Mortgage Guarantee Scheme
Since July 2025 the government has run a permanent Mortgage Guarantee Scheme. It guarantees lenders against part of their losses on high loan-to-value mortgages, to keep them available to first-time buyers and home movers with a deposit as small as 5%, anywhere in the UK. Under the scheme’s rules a guaranteed mortgage must:
- be for more than 90% and up to 95% of the home’s value;
- be a repayment mortgage (not interest-only) and the first charge on the home;
- be for a home you’ll live in (not buy-to-let), which you’ll own outright rather than through shared ownership or shared equity.
You don’t apply to the scheme yourself: participating lenders use it for some of their 95% mortgages, and to you it’s an ordinary mortgage.
What a 5% deposit costs against 10%
On a £250,000 home, repaid over 25 years at the Bank of England’s average 2-year fixed rates for August 2026:
| 5% deposit | 10% deposit | |
|---|---|---|
| Deposit | £12,500 | £25,000 |
| Mortgage | £237,500 (95% loan-to-value) | £225,000 (90% loan-to-value) |
| Average 2-year fixed rate | 5.52% | 5.16% |
| Monthly payment | £1,461 | £1,336 |
At these rates the smaller deposit costs about £125 a month more, or £2,998 over a 2-year fix. Averages hide a wide range, and your own rate depends on the lender and your circumstances. Waiting to save the extra £12,500 also has a cost: the rent you pay in the meantime.
Negative equity
With a 5% deposit, your equity at the start is 5% of the price, less any fall in value. If prices fall by more than that before you’ve paid down much of the loan, you owe more than the home is worth. That doesn’t change your payments, but it can make it hard to sell or to remortgage to a new deal at 95% or below, which can leave you on your lender’s standard variable rate when your fixed rate ends.
If a 95% mortgage isn’t enough
- Shared ownership lets you buy a share and rent the rest, with a deposit worked out on the share: see shared ownership explained.
- First Homes are sold below market value in England, so a 5% deposit is 5% of a lower price: see the First Homes scheme.
- Family help with the deposit, or a guarantor: see helping your child buy a home.
Related guides
- First-time buyers guide: costs, deposits, schemes and stamp duty relief in one place
- How to save for a house deposit: where to keep a deposit and how long saving takes
- Help to Buy alternatives: the schemes that help first-time buyers now, compared
- How much deposit do I need?
Your home may be repossessed if you do not keep up repayments on your mortgage. PocketWise provides information and guidance, not financial advice. Seek independent mortgage advice before making decisions about borrowing.