How much deposit do I need to buy a house?

It’s the big question. Anyone considering buying property for the first time knows that they will have to put down a large lump sum – but exactly how large does it have to be? In recent years the general rule has been that you’ll need (at least) 10% of the property’s value in cash, with the other 90% coming from a mortgage. Mortgage lenders reward higher deposits with lower interest rates and better all-round deals, and of course the more equity you have in your property, the more security you have.

However, in March this year, the government announced a new scheme that enables first-time buyers to access 95% mortgages, bringing their deposits down to just 5%. To put this in context: in April 2021, the average property price in the UK was around £251,000. So a 5% deposit for an average property would be about £12,550, compared to £25,100 for a 10% deposit.

The good news is that now is a great time to be getting a mortgage, according to Aaron Strutt from Trinity Financial. He says: “Banks and building societies have been reducing the cost of their rates for quite a while and they are incredibly cheap. The best two and year fixes are available below 1 percent, while 10 percent deposit rates start at 2.30%.”

The best deals are offered to people with a lower loan to value (LTV), so for the lowest rates you will typically need to have a deposit of between 25 and 35 percent, which is difficult to achieve for most first-time buyers. But there can be a lot of variation in what lenders are willing to lend, notes Aaron, who points out that: “first-time buyers tend to want advice to make sure they are getting the best deal. It is not uncommon for borrowers to approach their bank and find out they will not lend them enough money, they then ask for help to find a more generous lender often with better rates.”