Choosing between a 5% and 10% deposit is one of the most consequential financial decisions a first-time buyer will make — and it is rarely as simple as saving as much as possible before buying. The right answer depends on the current interest rate environment, the lender landscape, and the true opportunity cost of waiting.
Lenders charge more to borrowers at higher loan-to-value ratios. The gap between a 95% and 90% LTV mortgage rate has historically ranged from 0.5% to 1%, depending on market conditions. With the Bank of England Base Rate having peaked at 5.25% in 2024 before beginning a cautious easing cycle, lenders have maintained a meaningful premium at 95% LTV. On a mortgage of £260,000, this premium can translate to over £1,400 in additional interest per year.
Inflationary pressures, energy market volatility, and geopolitical uncertainty drove Base Rate to its highest level in sixteen years. Those same forces shape how lenders price risk today. A buyer choosing their deposit level is also, implicitly, placing a view on where rates will be when they come to remortgage. If the easing cycle continues as expected and Base Rate settles below 4%, the premium at 95% LTV should narrow — but forecasts can and do shift.
Spending an additional twelve to eighteen months saving from 5% to 10% has a cost that is easy to overlook: rent. In most UK cities, monthly rent on a comparable property runs significantly above the mortgage payment. If house prices also rise during that period, the additional deposit target grows in absolute terms, potentially extending the wait further. The decision to delay needs to be made with full awareness of these compounding costs.
At 95% LTV, the number of participating lenders is smaller and their criteria more restrictive. New-build properties, flats, and non-standard constructions can face additional limitations. Moving to 90% LTV opens up the full market — more lenders, more product types, and meaningfully better options for buyers with any complexity in their financial profile.
Working with a whole-of-market broker allows buyers to see the full picture before committing to a deposit level. The right conversation happens before the application — not after.