95% Mortgage Deals Hit Highest Level Since 2008 as Lenders Expand Low-Deposit Options for UK First-Time Buyers
12 January 2026
What is moving UK mortgage pricing right now is less about a single interest-rate headline and more about competition: lenders are widening choice for buyers with small deposits, even as higher loan-to-value borrowing remains priced at a premium and comes with tighter rules.
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What Is Driving More 95% Mortgage Deals Now
A key shift for first-time buyers is the sheer number of 95% loan-to-value mortgages (where you put down a 5% deposit). Moneyfacts data reported that 95% mortgage availability has risen to the highest level seen since 2008, with hundreds of deals now on the market and materially more choice than a year ago.
This expansion is happening against a backdrop where the Bank of England is holding Bank Rate at 3.75%, leaving lenders and markets to focus on the outlook for inflation and the pace of future cuts rather than expecting rapid, straight-line falls in borrowing costs.
Competition matters because high loan-to-value mortgages are a volume battleground: lenders can win first-time buyer relationships early, and some borrowers later become remortgage customers. But the underlying risk hasn’t disappeared: at 95% loan-to-value, small price falls can leave buyers with little or no equity, so lenders typically pair wider availability with stricter criteria and property-type restrictions.
Policy has also nudged the market. A new Mortgage Guarantee Scheme published by the UK government is described as permanently available from July 2025, designed to sustain availability of 91–95% loan-to-value mortgages by providing participating lenders with a government-backed guarantee on a portion of losses.
How 95% Mortgages Work and Why Pricing Stays Higher
A 95% mortgage means you borrow 95% of the property value and contribute 5% yourself. The upside is obvious: a smaller deposit can shorten the “saving gap”, particularly where rent and living costs make it hard to build a 10–15% deposit.
The trade-off is cost and flexibility. Lenders price for higher risk at higher loan-to-value, so rates can be higher than equivalent deals at 90% or 85% loan-to-value, and product fees or early repayment charges may be more common. Even where a headline rate looks competitive, the total cost over the fixed period depends on the loan size, any fees added to the mortgage, and what happens when the deal ends.
Another practical difference is how quickly your options can change. High loan-to-value deals often have shorter “shelf life” because lenders manage capacity, capital, and risk appetite. If the market moves (or a lender hits a target), a product can be withdrawn or repriced. That is why decisions based on “today’s best rate” can be fragile—planning needs to include a buffer for rate changes and valuation surprises.
Finally, a 95% mortgage doesn’t bypass affordability. Lenders still run income and expenditure checks and apply their own stress tests. A smaller deposit helps with access, but it does not guarantee the loan amount you want will be available.
Editor Briefing: The New Wave of 98% and 100% Mortgages
Alongside the growth in 95% mortgages, a “new wave” of near-no-deposit products is reappearing—most notably 98%, 99% and 100% options. These can be useful in specific situations, but they are not a like-for-like replacement for saving a deposit. The detail matters.
98% mortgages (2% deposit)
Santander has launched a 98% loan-to-value first-time buyer product called “My First Mortgage”, described as a five-year fixed rate at 5.19% with zero product fee and £250 cashback.
The same product is positioned with a minimum deposit of £10,000 and borrowing between £190,001 and £500,000, and it is not available for flats, new build homes, or properties in Northern Ireland, with early repayment charges potentially applying.
98% can therefore mean “as little as 2%” rather than “any property with 2% down”. A fixed minimum cash deposit and a minimum loan size can effectively narrow who it suits—particularly outside certain price bands or if you’re buying a flat.
99% mortgages (£5,000 deposit style products)
Yorkshire Building Society’s “£5k Deposit Mortgage” is presented for first-time buyers with a minimum deposit of £5,000, up to 99% loan-to-value on properties up to £500,000, and it is not available for new build flats or houses or in Northern Ireland.
The “£5,000 deposit” framing is important: on a £100,000 purchase, £5,000 is 5% (a standard 95% mortgage). On a £300,000 purchase, £5,000 is closer to a 1.7% deposit (near-99% loan-to-value). These products can be helpful where incomes support the payments but deposit saving is the main barrier; they can also amplify negative equity risk if prices dip early on.
Newcastle Building Society also describes its “First Step” mortgage as up to 98% loan-to-value with a minimum deposit of £5,000, on mortgage values from £96,000 to £350,000.
100% mortgages (no deposit)
Skipton Building Society’s Track Record mortgages are presented as low to no deposit options, using a track record of paying rent, with eligibility criteria including being 21 or over, having no missed payments on debts/credit commitments in the last six months, having paid 12 months’ rent in a row within the last 18 months (for sole applicants), and a borrowing cap up to £600,000, excluding purchases in Northern Ireland.
The “catch” with most 100% mortgages is that they are rarely open-ended. They tend to be designed for a narrow borrower profile (often renters with strong payment histories) and may have constraints on property types, geography, and how affordability is assessed.
True costs, and the catches to watch
Across 98–100% options, the true cost is usually a combination of (1) a higher interest rate than lower loan-to-value borrowing, (2) less choice at remortgage time until the loan-to-value improves, and (3) higher sensitivity to house price falls. The catch is not just the headline loan-to-value: it is the eligibility filters, property restrictions, early repayment charges, and the risk that a small market downturn can trap borrowers in a more expensive follow-on rate if refinancing options shrink.
Who Qualifies: Credit, Income, Property Types, and Deposit Rules
Eligibility is where most high loan-to-value mortgages are won or lost. While every lender is different, patterns are clear:
Credit conduct and recent missed payments
High loan-to-value products tend to demand cleaner recent credit history because there is little equity buffer. For example, Skipton’s Track Record criteria include “no missed payments” on debts or credit commitments in the last six months.
Income, loan size, and affordability
Near-no-deposit deals can come with minimum loan sizes and borrowing ranges that exclude some applicants. Santander’s “My First Mortgage” describes borrowing between £190,001 and £500,000 and warns that negative equity is a risk where a property falls in value.
Deposit rules: gifted deposits and minimum cash deposits
Not all “low deposit” products treat family gifts in the same way, and some are framed around a minimum cash amount rather than a percentage. A product with a fixed minimum deposit can still be high loan-to-value on larger purchases, but it can also be less helpful on smaller purchases if the lender’s minimum loan size is above your budget.
Property type and location restrictions
Restrictions are common at higher loan-to-value. Santander states its 98% product is not available for flats, new build homes or properties in Northern Ireland.
Yorkshire Building Society’s £5k deposit product states it is not available for new build flats or houses and not available in Northern Ireland.
These filters can matter as much as the deposit itself. Many first-time buyers start with flats or new builds, so a headline “2% deposit mortgage” may not match the property they actually want to buy.
True Costs and the Catches to Watch
Negative equity risk is front-loaded
At 95–100% loan-to-value, a modest price fall can wipe out equity. That can block a remortgage onto a cheaper deal at the end of a fixed rate, and it can complicate selling if you need to move. Santander explicitly flags this risk for low deposit mortgages.The reprice risk at the end of the initial deal
Many high loan-to-value deals are five-year fixed. If you reach the end of that fix and you are still at a high loan-to-value, the choice of remortgage products may be narrower, and the lender’s reversion rate could be materially higher than your fixed rate. Planning matters: if your budget allows, modest overpayments (where permitted) can help reduce loan-to-value over time, but borrowers should always check their mortgage terms and early repayment charges before acting.The “minimum deposit” can be misleading
A product marketed as “£5,000 deposit” is not the same as “5% deposit”. The higher the purchase price, the higher the loan-to-value becomes. That can mean higher monthly payments, tighter affordability, and higher risk if the market turns.Fees, cashback, and incentives can distract from total cost
A mortgage with no product fee or a cashback incentive can be helpful with moving costs, but it does not automatically mean it is cheaper overall. The total cost depends on the rate, the balance, the term, and what you do when the deal ends. Santander’s 98% launch includes a rate, a zero fee statement, and cashback, which should be weighed against the higher balance you are borrowing at very high loan-to-value.Inflation and household bills still shape affordability
Even where rates stabilise, affordability is influenced by the cost of living. The Office for National Statistics reported CPI inflation at 3.4% in the 12 months to December 2025.The market context: prices and confidence
House price direction affects risk at high loan-to-value. Halifax reported an average house price of £300,077 for January 2026, with annual growth of 1.0%.
A market that is flat-to-modestly rising can feel supportive, but it does not remove downside risk—especially if you might need to sell within a few years.
Practical Next Steps for First-Time Buyers
If you are considering a 95% mortgage, or stretching to 98–100%, treat the decision as a risk-management exercise as much as a home-buying milestone:
Start with the outcome you need, not the maximum you can borrow
Work backwards from a payment you can sustain if household bills rise, or if you need to switch deals in the future at a higher rate than you expect. Leave headroom for maintenance and ownership costs.
Match the mortgage type to your likely time horizon
If you may move within five years, check early repayment charges and portability. If you are likely to stay longer, consider whether a longer fixed period gives you stability, balanced against the risk of being locked in if rates fall.
Pressure-test your plan for the end of the fixed rate
Ask: “If I am still at 90–95% loan-to-value when this deal ends, what are my options?” A realistic plan could include saving alongside the mortgage, overpaying within allowed limits, or focusing on a property that is less likely to be hard to sell.
Get clarity on criteria early
High loan-to-value deals can have sharp edges: flat exclusions, new build restrictions, minimum loan sizes, and credit conduct requirements. Confirm these before you spend money on surveys and solicitors.
Mortgage One is a qualified mortgage adviser and appointed representative of Quilter Financial Services Ltd. If you want help comparing low deposit mortgage routes (including 95% mortgages and specialist near-no-deposit structures), Mortgage One can explain trade-offs, likely lender criteria, and timing—based on your income, credit profile, and the property you want to buy.
Key numbers (from cited sources)
Bank of England Bank Rate: 3.75% (decision published 5 February 2026)
95% loan-to-value mortgage deals: 537 (as reported from Moneyfacts data)
90% loan-to-value mortgage deals: 981 (as reported from Moneyfacts data)
CPI inflation: 3.4% year-on-year (December 2025)
Halifax average UK house price: £300,077 (January 2026)
Figures as of 12 February 2026 London
The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. If you’d like to understand what these moves could mean for you, speak to Mortgage One. We can explain your options and timings based on your specific circumstances.
Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.
FAQs
1. What Is a 95% Mortgage and How Much Deposit Do I Need?
A 95% mortgage is a home loan where you borrow 95% of the property value and contribute a 5% deposit. On a £200,000 purchase, that would typically mean a £10,000 deposit (plus fees and moving costs).
2. Why Are 95% Mortgage Rates Often Higher Than Lower Loan-to-Value Deals?
Because the lender is taking more risk when you have less equity. A higher loan-to-value can lead to a higher interest rate, and sometimes fewer product options.
3. Are 98% Mortgages Available in the UK and Who Are They For?
Yes, some lenders have introduced 98% loan-to-value mortgages aimed at first-time buyers. These often come with minimum cash deposit rules, borrowing ranges, and property restrictions (for example, some exclude flats or new builds).
4. Can I Get a 100% Mortgage With No Deposit?
A small number of options exist, typically with strict criteria. For example, some are designed for renters who can evidence consistent rent payments and meet tighter credit and affordability checks. Others rely on family or friends providing security through linked savings.
5. What Is Negative Equity and Why Does It Matter More at 95–100% Loan-to-Value?
Negative equity is when you owe more on the mortgage than the home is worth. At very high loan-to-value, even a small fall in house prices can create negative equity, which may limit remortgage options and complicate selling.
6. Do Gifted Deposits Work With Low Deposit Mortgages?
Sometimes, but not always in the same way across lenders and products. Some high loan-to-value products are designed around a minimum cash deposit and may have specific rules about where the funds come from and whether they are repayable.
7. What Happens When My High Loan-to-Value Fixed Rate Ends?
You will usually move onto the lender’s follow-on rate unless you switch. If your loan-to-value is still high, your remortgage choices may be narrower. Planning ahead—before the deal ends—can improve your options.