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UK MORTGAGE CENTRE

Who is eligible for a 5% mortgage in the UK?

February 27, 2024

Unsure whether you’ll be accepted by lenders for a five per cent mortgage in the UK?

Regardless of whether you have concerns about the size of your deposit and affordability or you’re simply doing research as a first-time buyer, the expert mortgage advisors here at UKMC can help.

To help you determine whether it’s worth considering a 5% mortgage deal, we explain how this arrangement works and who is eligible, alongside identifying some of the pros and cons this type of mortgage product.

What is a 5% mortgage?

A 5% mortgage, also referred to as a 95% loan-to-value (LTV) mortgage, is a type of deal where the buyer puts down a 5% deposit and obtains a mortgage to cover the remaining 95%

This contrasts with the more common deposit of between 10% and 20% that is often required by mortgage lenders for prospective homeowners to secure a property.

These mortgage deal arrangements have become easier for first-time buyers to obtain following the introduction of the government’s Mortgage Guarantee Scheme, which was launched in April 2021 and is due to run until mid-2025.

Are 5% mortgages only for first-time buyers?

So, are 95% mortgages only for first-time buyers? Yes, it’s true that 5% mortgages are not restricted to just first-time buyers.

While they’re a popular option for first-time buyers, any buyer, including current and previous homeowners, with a deposit of at least 5% can apply for a 95% loan-to-value mortgage.

Should first-time buyers apply for a 5% mortgage?

As with most arrangements, there are both pros and cons to applying for a 5% mortgage.

For example, interest rates for this type of mortgage tend to be higher than deals where you put down a deposit of between 10% and 20%. This means you’ll end up paying more over a longer period.

Not to mention, you’ll also have increased risk of negative equity if house prices fall. This means the property ends up being worth less than the outstanding balance of your mortgage loan.

However, for many first-time buyers, especially those renting in more expensive areas of the UK, a 5% deposit is often the only way to get a foot on the property ladder.

Plus, with increasing costs of living and rising house prices, waiting to build your deposit to at least 10% could push properties currently on the market out of your reach, forcing you to rent for longer.

Discuss your options with our expert mortgage advisors

Eager to find out whether you’ll be accepted for a 5% mortgage? Please don’t hesitate to contact the team of highly-knowledgeable and experienced mortgage advisors at UKMC.

Regardless of whether you’re a first-time buyer or current homeowner, we can review your options on your behalf to help you secure a mortgage deal that works for you and your family.

Our family-run business is based in Warrington and provides expert mortgage support for customers across the Cheshire area and further afield. To find out more about our services, why not book your appointment with one of our mortgage advisors today?

To do this, you can either give us a call on 01925 573328, send your enquiry via email to hello@ukmc.co.uk, or fill out our online contact form to request a call back at a more convenient time.

UK Mortgage Centre is a Trading Style of The UK Mortgage Centre Group. The UK Mortgage Centre Group is authorised and regulated by the Financial Conduct Authority – FRN 826982. Registered in England & Wales: 11614569. As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments. The Financial Conduct Authority does not regulate some forms of buy-to-let mortgages. The Financial Conduct Authority does not regulate will writing and taxation and trust advice.