Lloyds Banking Group has launched a new mortgage allowing first-time buyers to secure a home with a £5,000 deposit.

The UK’s largest mortgage lender is reducing one of the most persistent barriers to homeownership by introducing a product aimed at first-time buyers struggling to raise a deposit.

Available from 18 May across Lloyds, Halifax and Bank of Scotland brands, the mortgage is open to borrowers purchasing properties valued at up to £300,000, with a maximum loan of £295,000 and a minimum deposit of £5,000.

The five-year fixed rate product is priced at 5.89% and comes with no product fee, a maximum term of 40 years and a loan-to-income cap of 4.5x. The deal also includes a free Level 1 valuation and is available through both intermediary and direct channels.

The proposition equates to a maximum loan-to-value of 98%, although eligibility is restricted to applicants with a strong credit profile. At least one applicant must be a first-time buyer, while both employed and self-employed borrowers are eligible.

However, the scheme excludes new build properties, shared ownership purchases and cases involving gifted deposits.

DEPOSIT GAP TARGETED

The launch reflects continued affordability pressures facing first-time buyers, particularly around deposit requirements.

According to UK Finance data from May 2025, the average first-time buyer household purchasing without financial assistance had an income of £65,351 and bought a home worth £279,381. Under a standard 5% deposit structure, this would require savings of around £14,000 before accounting for additional costs such as legal fees and furnishings.

By contrast, the new product caps the deposit at £5,000, significantly reducing the upfront requirement across much of the UK market.

Regional data based on the Halifax House Price Index for April 2026 shows that buyers in areas such as the East Midlands, North West and Wales could see deposit reductions of between roughly £5,000 and £7,000 compared with a typical 5% mortgage.

In lower-value regions such as the North East, the reduction is smaller but still material, while higher-value areas including Greater London and the South East fall outside the scheme’s property price cap.

The lender estimates that around 270,000 homes priced at £300,000 or below were purchased with a mortgage in 2025, suggesting a substantial potential market for the product.

For properties priced between £100,000 and £300,000, the £5,000 deposit requirement is lower than that of a traditional 95% loan, potentially widening access for buyers with limited savings.

LENDER AND BROKER IMPLICATIONS

Amanda Bryden, head of Halifax Intermediaries and Scottish Widows Bank, said: “We regularly get feedback from brokers that first time buyers find getting a deposit together one of the main barriers to them buying a home and today we are taking another step to help them get past that.

“We recognise our responsibilities as a lender to ensure loans are affordable – not just now, but in the future for all our borrowers. With this new offer, brokers have a new option for buyers who have shown their ability to manage their finances, save for a deposit themselves and who are taking the greater certainty of a longer-term fixed rate.

“A lower deposit can make it easier to save for a deposit for many, or it can help free up cash for other costs, like conveyancing or setting up your new home the way you want it.”

The move adds to a growing range of high loan-to-value products as lenders respond to affordability constraints and subdued transaction levels. For brokers, the product may offer an additional route for clients who meet credit and income thresholds but have struggled to accumulate a traditional deposit.

However, the requirement for a high credit score and the exclusion of new build properties may limit its applicability in some segments of the first-time buyer market.

David Hollingworth, associate director at L&C Mortgages, said: “We know that first time buyers can struggle to amass a deposit big enough to make buying a reality. High rents can make it a slog to reach the minimum 5% deposit that most mortgages demand and the Bank of Mum and Dad isn’t an option for everyone.

“This new launch is significant as it marks another major high street lender developing solutions for those with a small deposit. We’ve seen a growing range of lenders in this space, designing products that could significantly speed up the journey to home ownership.

“There are now several deals where it could be possible to borrow more than 98% of the purchase price or even require no deposit at all. This will help those that have good affordability but are being held back by the need for the traditional deposit of 5% or more. On a £300k purchase price this could mean a deposit of £5k, rather than £15k.

“It won’t necessarily work for everyone and doesn’t combine with the higher lending multiples that lenders can now offer. The purchase price cap of £300k is at a level that may dent eligibility in regions where prices are highest and those able to scrape a bigger deposit together will open up cheaper rates.

“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.”