These lenders may help you buy a house with just a 5% deposit

Short on savings, but desperate to buy your first home? The dream of home ownership may be closer than you think. We have entered a new post-recession era of mortgage lending. And the good news for cash-strapped borrowers is that 95% mortgages are very much back on the menu.



The return of the 95% mortgage deal

In the free-and-easy early 2000s, you could borrow 100% or even more of a property’s value from a number of lenders.

Then came the credit crunch, caused in part by overstretched homeowners failing to keep up with their mortgage repayments.

Suddenly, embattled banks and building societies only wanted to lend to people with large deposits that would cushion them from any losses should mortgage holders become unable to pay.

Now, however, a number of lenders have decided to get back into offering deals for borrowers with a 5% deposit. Just this week, Tesco Bank was the latest to get involved with a range a two, three and five year fixes.

So while the best mortgage rates are still reserved for people with large deposits of say 40% of a property’s value, there are also plenty of competitive 95% deals around.

We’ve done the legwork for you and rounded up the cream of the current 95% crop…

The best 95% mortgages

Looking to borrow 95% of the value of your next home? These are the top deals you can choose from at the moment…

Help to Buy deals

Specifically aimed at those who can only raise a deposit of 5%, the government’s Help to Buy scheme is a godsend for cash-strapped borrowers with their eye on a property worth up to £600,000.

“A number of lenders have decided to get back into offering deals for borrowers with a 5% deposit…”

What’s more, some of the cheapest 95% mortgage deals are available to buyers using the Help to Buy scheme…

  • *First up is the Post Office’s two-year, fixed-rate deal at just 4.29% (reverting to 4.49%). It is open to all borrowers, including those using Help to Buy. And what’s more, there are no upfront fees to worry about.
  • Next in line is HSBC’s two-year fix at 4.39%, which is also available to Help to Buy buyers with a 5% deposit and comes with a booking fee of just £199.
  • Then there’s Barclays’ fee-free, two-year fix at 4.49%.
  • And NatWest’s two-year deal, which is also at 4.49% with no upfront fees.

Fixed-rate deals

Buying a property without the Help to Buy scheme?

You have the choice of an even larger range of 95%, fixed-rate mortgages lasting two, three or five years…

  • Nationwide Building Society’s two-year fixes for borrowers with a 5% deposit start at just 3.99%, plus fees of £499. If you prefer, however, you can dodge the upfront fee and pay a rate of 4.29%. Either way, you could qualify for £1,000 cashback on completion.
  • Chelsea Building Society also has a two-year fix at 4.09%. But watch out: the upfront costs of this deal come to an eye-watering £1,675.
  • Clydesdale Bank’s three-year deal has a higher rate of 4.89%. But it has the big advantage of having no upfront fees.
  • Virgin Money also has a three-year fix at 4.99%, with a booking fee of just £99 and cashback of £300.
  • Chelsea Building Society has a five-year, fixed-rate deal at 4.69%. Again, however, you have to take into account high upfront fees of £1,675.
  • Yorkshire Building Society’s five-year fix, meanwhile, is at 4.79% with upfront fees of £975.

Variable rate deals

If you are stretching yourself financially to get a foot on the property ladder, it is probably sensible to choose a fixed-rate mortgage that offers the security of fixed monthly repayments.

You do pay a bit extra for this security though, meaning those prepared to take on the risk of a variable-rate deal can often benefit from slightly lower rates…

  • Hinkley and Rugby Building Society has a two-year, discounted variable-rate deal with a current rate of just 3.49%. The upfront fees are on the high side, though, at £999.
  • Leeds Building Society has a two-year discount currently at 3.55%. The arrangement fee on this deal is £800.

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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