The Deposit Question Every First-Time Buyer Faces

For anyone stepping onto the property ladder in 2025, the size of the deposit remains the single biggest factor shaping what kind of home they can buy and how much it will cost them over the long term. Saving while paying rent and dealing with rising living costs is never straightforward, and many buyers understandably focus on the absolute minimum required. Yet in practice, the difference between a 5% deposit and a 15% or 20% deposit can mean thousands of pounds a year in extra repayments, not to mention access to a completely different set of lenders and products.

At Willow Private Finance, we often meet first-time buyers who are surprised by how much impact a deposit makes beyond the headline rate. The deposit not only influences what products you can access, but also shapes lender perception of risk, affordability stress tests, and even how much you’re allowed to borrow in the first place. Understanding these dynamics early can help you plan your buying strategy more effectively.

Can You Really Buy with Just 5%?

The simple answer is yes — some lenders still support mortgages at 95% Loan-to-Value (LTV). These deals are particularly attractive for renters who are keen to stop paying their landlord’s mortgage and start building equity of their own. Government-backed schemes such as the Mortgage Guarantee continue to provide support in this space, and certain high-street banks are willing to lend at this level to applicants with excellent credit and stable employment.

But the trade-offs are clear. Interest rates at 95% are considerably higher than those available to borrowers at 80% or 75% LTV. The monthly repayments can feel heavy, particularly in the current environment where affordability is closely stress tested against the risk of rate rises. For example, a couple buying a £250,000 starter home with a 5% deposit may face repayments of more than £1,400 per month — a figure that can easily stretch a first-time buyer’s budget once you add in council tax, insurance, and running costs.

While this path works for those determined to buy as soon as possible, it’s worth carefully weighing whether entering the market with the smallest possible deposit is a smart financial move in the long term. Sometimes, waiting and exploring whether a mortgage capacity report would help clarify your affordability before applying can save time and stress.

Why 10–15% Is the Sweet Spot for Many Buyers

For those who can push their deposit to 10% or even 15%, the outlook improves dramatically. At this level, the number of lenders willing to offer products increases, rates become more competitive, and arrangement fees are often lower. It’s not just about cost either — lender choice is a critical advantage. Instead of being confined to a handful of 95% deals, you now have dozens of options across both high-street and specialist lenders.

This means brokers can truly tailor recommendations to your circumstances. For instance, self-employed first-time buyers or those with income made up of bonus or commission are far more likely to find a lender prepared to take a nuanced view if they present a deposit of 10–15%. The extra savings act as reassurance that reduces perceived risk, making underwriters more flexible.

Many of our clients at Willow find that waiting an additional year to boost their deposit from 5% to 10% pays dividends not just in rate savings, but in the quality of lender they can work with. For buyers with irregular income, our blog on mortgages for self-employed borrowers explains how lenders assess different types of earnings.

Moving Up to 20–25%: Where Real Value Emerges

When your deposit reaches 20% or above, the landscape shifts again. At 75–80% LTV, lenders view your application as much less risky. This opens the door to significantly lower rates and — importantly — more generous income multiples. For example, while a lender might cap borrowing at 4.5x income for a buyer at 95% LTV, that same lender may stretch to 5x or even 5.5x when the deposit sits at 20–25%.

This can make the difference between being restricted to a one-bedroom flat or affording a two-bedroom home that meets your long-term needs. The monthly saving is also considerable. On a £250,000 property, moving from a 5% deposit to 20% could cut repayments by around £280 a month, or more than £3,000 a year. Over the life of a 25- or 30-year mortgage, the difference amounts to well over £100,000.

For buyers thinking about long-term planning, this is also the point where features such as offset mortgages become more realistic. A bigger deposit and savings buffer give lenders confidence that you can manage more flexible products.

The Premium Tier: Deposits of 40% and Above

Although less common for first-time buyers, some enter the market with deposits of 40% or more, often through inheritance or parental gifts. At this level, you’re considered a low-risk borrower, and lenders compete aggressively for your business. Rates are typically among the lowest available in the market, and underwriting is smoother, with fewer challenges on income multiples or property type.

This isn’t the reality for most, but it underlines the central point: the larger the deposit, the better the outcome, both in the rates you’re offered and the long-term financial security you build.

Family Support and Gifted Deposits

The so-called Bank of Mum and Dad continues to play a crucial role in 2025. Most lenders will accept a gifted deposit, provided it’s documented correctly. This usually requires a deed of gift stating that the funds do not need to be repaid, proof of the source of funds for anti-money laundering purposes, and confirmation that the donor has no stake in the property.

Handled well, a gifted deposit can significantly increase buying power, reduce interest costs, and help pass affordability checks. Handled poorly, it can cause delays or even derail an application. This is an area where working with a broker is invaluable. Our article on how family-gifted deposits are viewed by lenders explores this in detail and sets out what paperwork you’ll need.

Deposit Size and Affordability: What the Numbers Mean

It’s easy to think of deposit size as simply affecting the monthly repayment. In reality, it’s a lever that shapes every stage of affordability. Lenders use deposit levels as part of their affordability calculators, stress testing at higher interest rates to see if a borrower could withstand potential shocks. A stronger deposit makes those tests easier to pass. It can also remove restrictions on how lenders treat income, particularly variable pay such as overtime or bonuses.

For some buyers, this can be the deciding factor between securing the mortgage they need or falling short at underwriting. Saving longer for a stronger deposit isn’t always easy, but it can put you in control of the process rather than at the mercy of a handful of 95% products. If you’re unsure how to plan this strategically, our guide on first-time buyer mortgages in 2025 sets out the wider picture.

How Willow Can Help

At Willow Private Finance, we understand that every first-time buyer’s journey is different. Some want to get onto the ladder as quickly as possible with a 5% deposit, while others are prepared to wait and strengthen their position. We work with both high-street and specialist lenders, giving us access to the whole of the market. This allows us to present options that aren’t always visible on comparison sites and to explain clearly how each product will perform over the short and long term.

If you’re considering family help, exploring government schemes, or simply want to know how much of a difference saving another £5,000 might make, our team can guide you through the numbers and the process. The right advice at this stage can save not only thousands of pounds but also months of wasted time.

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