95% mortgages

How do 95% mortgages work?

You pay a deposit worth 5% of the property value and the mortgage lender then loans you the remaining 95%.

Example: For a property costing £150,000 you'd need £7,500 for a 5% deposit. Your lender would then lend you £142,500 to cover the remaining 95%.

You'll repay the 95% loan over the full term of the mortgage alongside interest payments. The interest rate depends on the deal you get, however, and you can usually remortgage onto a new rate once each deal ends.

The average interest rate for a 95% LTV mortgage in February 2025 was 5.5%.

Can you get a mortgage with 5% deposit?

The majority of lenders offer 95% LTV mortgages, which can be particularly appealing to first-time buyers due to the lower deposit requirement. However, remember to look at current mortgage rates for higher deposit options, as they will usually save you more in the long term.

Whether you are personally eligible for a 95% mortgage deal will depend on your own individual circumstances. Eligibility for 95% mortgage deals is similar to other lower LTV mortgages, with affordability criteria applied so that lenders can be confident in your ability to make repayments.

A prospective lender will assess your income, as well as reviewing your expenses and any debt you owe before deciding whether or not to offer you a mortgage. Your credit history will affect your ability to borrow too. The best 95% LTV mortgage rates will be available to those with a good credit score and stable income.

Why does loan-to-value matter?

The loan-to-value ratio is a huge factor for lenders when deciding how much they can lend you, and at what rate.

If you borrow more in relation to your home's value, then you're a higher risk for the lender, as there’s more for you to pay back. That also means there’s more risk for you as the borrower. The more you borrow, the more you have to pay back and, crucially, the more interest you will eventually pay over the lifetime of the mortgage deal. Always aim for a mortgage you can afford comfortably, accounting for any potential rises in interest rates.

You're also more likely to fall into negative equity more easily if you owe a greater percentage of the property value. This is because if the property prices suddenly dropped, it would be a shorter fall until you owed more than your home's new value.

What is the mortgage guarantee scheme?

Due to the increased risks for lenders, during the COVID-19 pandemic, 95% LTV mortgages weren't generally available. However, 95% mortgages saw a resurgence in April 2021 due to the government launch of a new 95% mortgage guarantee scheme.

Under the scheme, the government guarantees any amount borrowed over 80% to reduce the risk for lenders. This encourages banks to offer more high LTV mortgages.

The scheme ends in June 2025. However, as more lenders have returned to offering 95% mortgages generally, this should not mean that availability is reduced after that.

How much can I borrow with a 95% mortgage?

How much you can borrow from a mortgage lender depends on your individual affordability, and a broker can help you to access current mortgage rates.

A lender will generally base your borrowing on your annual income – you can normally borrow around 4 to 4.5 times this figure.

However, lenders will also look at your outgoings to determine whether you can afford the repayments. That's why it's often a good idea to assess your spending habits three to six months before applying for a new mortgage deal.

Lenders also review your credit history to check whether you can reliably manage debt. It's worth checking your credit score before you apply and trying to resolve any issues, including errors on your report.