First-time home buyers who haven't saved a deposit can take advantage of schemes that let them buy a home with no money down. These loans enable the borrower to obtain a mortgage for the full purchase price of their property.
These no-deposit mortgages were common a decade or so ago, when house prices were increasing, but when interest rates rose, many borrowers could not afford the repayments and had to sell their homes.
Many lenders withdrew 100% mortgage products from the marketplace because the risk of lending was too high.
Unfortunately, in today's financial climate, the criteria for lending have tightened significantly, particularly as house prices are stabilising and banks are less keen to lend. All of this has led mortgage providers to almost completely remove the 100% mortgage option.
In today's environment, you'll likely need a family member as a guarantor against the mortgage taken or have a deposit to qualify for a 95% mortgage or a 90% LTV mortgage with a 10% deposit.
The standard requirement for buying a home has always been that a potential buyer save a deposit as a down payment for the house they wish to buy, then arrange with a mortgage lender to borrow the balance. The logic behind this for lenders was that it provided a measure of security. Should the buyer default on payments at any point, the lender could repossess the property and have a good chance of recovering its money.
While house prices were on a continual rise, lenders didn't perceive a risk in making 100% loans, as the continued rise in property values virtually guaranteed they would get their money back. The advantage for buyers, particularly first-time buyers, was that there was no requirement to try to save up a deposit.
The downside of a 100% mortgage was that interest rates were usually much higher than those for conventional mortgages. Quite often, the borrower was required to take out a type of insurance known as a Mortgage Indemnity Guarantee (MIG), which provided the lender with some measure of security if the customer defaulted.
100% mortgages were primarily stopped due to the government's introduction of capital adequacy rules at the beginning of 2008. This change meant lenders had to set aside an amount equal to 75% of the property's Loan-To-Value (LTV) for each £1 lent.
For those of you who are not familiar with the term LTV, it refers to the % of the property's value lent as a mortgage, or the loan-to-value ratio. For example, if you have a 25% deposit and borrowed 75%, your LTV would be 75%.
The second reason why 100% mortgages stopped was that these types of mortgages are not viable when house prices are falling.
Today, a new buyer is required to save up at least a 10% deposit, and obviously, the larger your deposit, the better deal you can negotiate, as you are perceived to be in a lower-risk category. It's also essential to have a strong credit history when seeking a good mortgage deal. If you are struggling to build your deposit, there are some options to consider.
If you look hard enough, you can find a few mortgages at a 95% LTV, but keep in mind that when taking up these sorts of offers, it is highly likely that you will be paying a lot higher interest rates than usual.
Some first-time home buyers have been able to get assistance from their parents by having mortgage lenders take their parents' savings into account to facilitate a larger mortgage.
Other alternatives evolving include the government's affordable homes schemes or building contractors that offer a deposit in the form of an equity loan. These schemes could work for buyers and prove popular in the long run, but borrowers will need to understand the implications of an equity loan. Options such as shared ownership can be considered. This scheme involves purchasing an initial share in a home, which is built up over time to full ownership as your circumstances improve.
There are mortgages available with no deposit. Here are some lenders and their current interest rates and costs.
| Lender | Loan Type | Rate | Then | Fees |
|---|---|---|---|---|
| Barclays | 5 Yr Fixed | 5.29% | 5.74% | £0 |
| Bath BS | 5 Yr Fixed | 5.30% | 7.39% | £999 |
| Buckinghamshire | 5 Yr Fixed | 5.69% | 8.09% | £999 |
| April | 10 Yr Fixed | 6.18% | 7.50% | £1,190 |
| April | 15 Yr Fixed | 6.18% | 7.50% | £1,190 |
Data correct as at 30th January 2026.
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