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Sam covers personal finance topics, from the best savings rates to the reasons mortgage lenders say no. He enjoys crunching the numbers to help consumers get ahead.
Saving for a deposit remains one of the biggest hurdles facing first-time buyers, particularly as rising mortgage rates and high rents continue to put pressure on budgets.
Lloyds Bank is the latest lender to launch a low-deposit mortgage, allowing some buyers to purchase a home with a deposit of just £5,000.
Here, Which? explains how the new deal works, how it compares with rival mortgages and the restrictions borrowers need to watch out for.
The new product announced by Lloyds is 'aimed primarily at renters' grappling with the high cost of living. Almost two thirds of aspiring first-time buyers say saving for a deposit is now the hardest part of buying a home, according to research conducted by the high street lender.
The new mortgage will be available to first-time buyers, including those who are self-employed, from Lloyds Bank and Halifax – which are both part of Lloyds Banking Group – as well as through mortgage brokers. It will officially launch on 18 May.
When the product launches, it will offer an interest rate of 5.89%, fixed for five years, and have no product fees.
Borrowing for this mortgage will be capped at 4.5 times a buyer's annual income. Some other Lloyds Bank mortgages allow eligible first-time buyers to borrow up to 5.5 times their income.
Buyers purchasing a new build will not be able to apply for the new product. You will also not qualify if you are purchasing through a shared ownership scheme or with a gifted deposit.
Borrowers purchasing a property priced at more than £300,000 will also be unable to apply for the product.
The £300,000 property price cap means the mortgage may be better suited to buyers outside London and the south east. According to Lloyds research, the average first-time buyer property costs £464,646 in London and £302,396 in the south east. In all other UK regions, the average first-time buyer property costs less than £300,000.
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Here's how Lloyds' new deal compares to other five-year fixed-rate mortgages that allow first-time buyers to put down a deposit of less than 5% of the purchase value.
| Santander | My First Mortgage | 5.6% | £0 | 98% | £10,000 |
| Skipton Building Society | Track Record | 5.85% | £0 | 100% | £0 |
| Lloyds/Halifax | £5,000 deposit mortgage | 5.89% | £0 | 98% | £5,000 |
| Newcastle Building Society | 5 Year Fixed Rate - First Step | 5.89% | £0 | 98% | £5,000 |
| Yorkshire Building Society | £5,000 deposit mortgage | 6.45% | £0 | 99% | £5,000 |
| Accord Mortgages | £5,000 deposit mortgage | 6.64% | £0 | 99% | £5,000 |
Rates collected from Moneyfacts 12/5/26. Lloyds/Halifax rate will go live on 18 May.
Currently, Santander offers the best rate for mortgages with less than a 5% deposit. However, it does require a larger deposit than the other mortgages in the table.
When ranked by rate, the new product from Lloyds sits in the middle of the table. Of course, other lenders may alter rates between now and the launch of the new product on 18 May.
Skipton's track record mortgage remains the only no-deposit option for first-time buyers.
Every year, Which? surveys thousands of mortgage customers to uncover the best mortgage lenders and Which? Recommended Providers. We also analyse rates each month to identify the cheapest lenders on the market.
Find out how Lloyds performed in our latest customer survey, how competitive its mortgage rates are and what borrowers really think of the lender in our full Lloyds mortgage review.
The size of your deposit can make a big difference to your monthly payments, as a bigger deposit usually means you can access better rates.
We've looked at what a first-time buyer purchasing a property for £250,000 at a five-year fixed-rate (the most popular product for first-time buyers) will pay with no deposit, as well as with deposits of 1%, 2%, 5% and 10%.
| Deposit size (LTV%) | Cash deposit | Best rate | Monthly cost |
|---|---|---|---|
| 0% | £0 | 5.85% | £1,587.91 |
| 1% | £2,500 | 5.85% | £1,572.03 |
| 2% | £5,000 | 5.6% | £1,519.18 |
| 5% | £12,500 | 5.26% | £1,424.61 |
| 10% | £25,000 | 4.84% | £1,294.44 |
Rates collected from Moneyfacts on 12 May. For fair comparison only fixed-rate deals have been considered. Monthly cost assumes £250,000 home purchase with a mortgage term of 25 years.
Over a year, a borrower would save almost £2,000 in mortgage payments if they put down 5% instead of taking out a 0% deposit mortgage. Annually, the difference in mortgage payments between a 10% and 5% deposit is over £1,500.
The table also highlights the increased cost of taking out a mortgage since the start of the year. When Which? ran the same analysis in February, monthly repayments on no-deposit mortgages were more than £100 lower, while borrowers with a 10% deposit would have paid almost £90 less each month.
Low-deposit mortgages are a way of improving accessibility for homeownership, particularly for renters with high monthly costs.
Before choosing this type of mortgage product, it is important to consider the risk of negative equity, where your mortgage debt becomes higher than the value of your home. This can happen if house prices fall, particularly when buyers have only put down a small deposit. Negative equity can make it harder to move home or remortgage.
Commenting on the risks, David Hollingworth, associate director at broker L&C Mortgages, said: 'A smaller deposit does mean a higher chance of negative equity if property prices fall. That only becomes a problem where the property needs to be sold, which would crystallise a loss.
'There’s a big focus on affordability and the mortgage is a five-year fixed rate, so monthly payments won’t be affected by changes to interest rates. That should help ensure that payments are manageable and by the end of the five years borrowers will have eaten into their mortgage balance, hopefully riding out any dip in house prices in the meantime.'
If you're struggling to save up enough of a deposit, there are other options to explore.
A guarantor mortgage allows family or friends to put up money as collateral. This can be done by family or friends putting money into a specially designed savings account or using their own home as security.
Barclays, Buckingham Building Society, Halifax, Loughborough Building Society, Tipton & Coseley Building Society, and Vernon Building Society all offer guarantor mortgages.
You may also qualify for a first-time buyer scheme, which can help boost your savings or reduce the upfront costs of getting on the property ladder.
