Everything you need to know about Deposits in 2024.
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The last 12 months have been a roller coaster for many, with uncertainty about their house purchase being forefront. Deposits play a huge part in that, with no one knowing what to expect. We have seen the deposit unlock scheme, which allows you to buy an eligible New build property with as little as 5% discount. Also a couple of lenders have introduced 0% deposit mortgages. More recently the government has started talking about 1% deposit mortgages.
It has never been harder to save a deposit, with house prices rising much faster than wages. Not to mention average rent prices increasing across the country. Add on top of this a cost of living crisis that has made it even more difficult to save money for a deposit.
This is why these changes are needed more than ever. We need smaller deposit mortgages as it has never been harder to save for a deposit.
10% mortgage deposit is more than enough for most lenders. There are a few lenders that require a 15% deposit but for the majority, as little as 5% is needed currently. However, generally speaking the more deposit you have, the better interest rate you can expect.
10% mortgage deposit is a decent level for a first time buyer, considering the average first home costs £288,000, this therefore means an average deposit of £28,800, which is a huge amount of savings.
Currently the minimum deposit required for a mortgage is zero, however, there are several rules that you need to follow in order to be eligible for that type of mortgage. For example the credit report needs to be pretty good, and your rental payments need to have all been made in full and on time for at least 12 months.
On top of this they also impose limits to how much you can borrow based on the rent you have been paying previously. With this in mind, the 100% mortgage isn’t a good fit for most people.
Therefore, the minimum deposit for most people would be 5% currently. However, the government is currently discussing a scheme to allow for a 1% mortgage. I’ll follow up on this if and when we get further information.
Currently for most people they will need a 5% deposit. Whilst there are a couple of lenders that do not require a deposit, most people do not fit the criteria of these products. Therefore, for most of the population you will probably require a 5% deposit, based on the value of the property you are buying. So, for example, a £200,000 house would require a deposit of at least £10,000 for most people.
You can definitely get a mortgage with a 5% deposit. This is widely the minimum with most lenders in the market at the moment. The reason there is a minimum deposit amount is due to the Financial Conduct Authority’s Mortgage market review. During this review they decided that lenders needed to act responsibly, and part of that was having a minimum deposit level. However, as noted in other parts of this article, the government are currently considering a scheme to allow you to buy a house with a 1% deposit.
They have come back! During 2023, at least 2 lenders offered 100% mortgages. These mortgages come with certain caveats though. Unfortunately because they are harder to be eligible for they are also not that useful, with most applicants falling short in at least one of the criteria for the lenders.
The main exception to this is shared ownership, where the criteria is not as strict.
It is theoretically possible to get a mortgage with no deposit in the UK, there are certain times that this would be possible. Such as:
If you are wanting to buy a property and do not have a deposit, I highly recommend speaking to a qualified mortgage broker to discuss your options.
Currently it is not possible to get a 1% deposit mortgage. However, the government is currently discussing making this possible. It is incredibly early days though, and with the potential for a change in government in 2024, any scheme may never come to fruition.
At the time of writing you need a 5% deposit for most mortgages. However, some don’t require a deposit at all!
Currently the government are considering a 1% deposit mortgage scheme, and we’ll update you all when we have more information.