Can You Buy a New Build with 5%? Understanding Deposit Unlock
The landscape of new build home purchasing has evolved considerably since the closure of the government's Help to Buy scheme in October 2022. For buyers struggling to save a larger deposit, the Deposit Unlock scheme has emerged as a significant alternative, offering a route to homeownership with just 5% down.
What Is Deposit Unlock?
Deposit Unlock is a mortgage scheme developed by the housebuilding industry in collaboration with mortgage lenders. The scheme enables buyers to purchase a new build home with a 5% deposit, accessing a 95% mortgage on properties valued up to £833,250. Unlike its predecessor Help to Buy, Deposit Unlock is available to both first-time buyers and home movers, and crucially, buyers own 100% of their property from day one.
The scheme launched in June 2021 with a soft launch through Newcastle Building Society, before rolling out nationally later that year. The Home Builders Federation and its member house builders created an insurance scheme, managed by Gallagher Re, which provides participating mortgage lenders with protection on these high loan-to-value mortgages.
How the Scheme Works
The fundamental difference between Deposit Unlock and traditional mortgage arrangements lies in who bears the risk. Typically, mortgage lenders are cautious about offering high loan-to-value mortgages on new builds, often requiring deposits of 15% or even 25%. This caution stems from the inevitable devaluation that occurs when a "brand new" property becomes merely "one year old", along with other associated risk factors.
Under Deposit Unlock, participating house builders pay to insure the mortgages using funds from their property sales. This insurance-backed guarantee makes lenders more comfortable offering 95% mortgages on new builds, thereby opening up homeownership opportunities to those with smaller deposits. The buyer pays their 5% deposit and secures a standard mortgage for the remaining 95%, but benefits from the builder-funded insurance that enables competitive mortgage rates.
Current Lenders and Mortgage Options
As of winter 2025, three mortgage providers offer Deposit Unlock mortgages, all exclusively through mortgage brokers. Accord Mortgages provides loans up to £600,000, with recent rates including a five-year fixed rate at 5.25% with a £495 arrangement fee, or a two-year fix at 5.71% with the same fee. Both options include a free valuation and £250 cashback.
Perenna offers longer-term mortgages with terms ranging from 10 to 30 years. Their winter 2025 rate stood at 6.46% with a £1,999 product fee, although borrowers face no early repayment charges after five years. Bluestone Mortgages caters to buyers who may not meet mainstream lending criteria, offering loans up to £600,000. Their rates are higher, at 7.04% for a two-year fix and 6.79% for a five-year fix, both with a £1,495 fee, but they provide options for those with past credit difficulties.
It's worth noting that both Nationwide Building Society and Newcastle Building Society, early participants in the scheme, have withdrawn from offering Deposit Unlock mortgages. Nationwide ceased accepting applications in November 2024, whilst Newcastle also discontinued its Deposit Unlock products despite being the original launch partner.
Participating House Builders
To use Deposit Unlock, buyers must purchase from one of the participating house builders. More than 35 member house builders of the Home Builders Federation now participate in the scheme, representing a significant proportion of UK new build construction. However, it's important to understand that not all developments from these builders may offer the scheme, participation can vary by site and region.
Benefits and Considerations
The primary advantage of Deposit Unlock is straightforward, it provides access to homeownership for those who have managed to save 5% but would struggle to reach the 15-25% typically required for new build mortgages. The scheme offers a legitimate alternative to the closed Help to Buy programme, and unlike shared ownership arrangements, buyers own their entire property outright from completion.
However, buyers should carefully consider several limitations. The choice of properties is restricted to participating builders and specific developments, which may limit options compared to the broader market. The current number of participating lenders remains small, potentially meaning buyers don't always access the most competitive rates available elsewhere. Mortgage rates for Deposit Unlock products can be higher than standard mortgages with larger deposits, reflecting the higher loan-to-value ratio.
The "new build premium" warrants particular attention. New build properties often command a price premium whilst they're brand new, but this value can depreciate once the property is no longer the newest on the market. Buyers should plan to remain in their property for the longer term to ride out any initial value adjustments. Additionally, the scheme is not suitable for those purchasing a second property or buy-to-let investments.
Alternative Schemes
Deposit Unlock isn't the only route to purchasing a new build with a smaller deposit. The Own New Rate Reducer scheme allows buyers to purchase with a developer contributing 3% or 5% of the purchase price, which is used to reduce mortgage payments for the initial term. Own New also offers the Deposit Drop scheme in certain regions, enabling 5% deposit purchases through a different mechanism.
Buyers should also consider that 95% mortgages have become more widely available on older properties following the introduction of the government's Mortgage Guarantee Scheme. Purchasing an existing property rather than a new build opens up considerably more choice in terms of both properties and lenders, potentially offering better value and more competitive mortgage rates.
Making the Right Decision
For many buyers, Deposit Unlock represents a viable path to homeownership that might otherwise remain out of reach. The scheme has helped numerous buyers complete purchases since 2021, surpassing £100 million in lending by October 2022 and continuing to grow.
However, as with any significant financial commitment, buyers should thoroughly research their options. Consulting a mortgage broker is essential, as Deposit Unlock mortgages are only available through brokers who can compare rates and explain the full range of alternatives. Buyers should also consider whether saving for a larger deposit, exploring shared ownership, or investigating the First Homes Scheme might better suit their circumstances.
For those proceeding with a Deposit Unlock purchase, protecting your investment through a professional snagging inspection becomes particularly important. When you're stretching your finances to enter the property market, ensuring your new home meets the quality standards you've paid for is crucial. A comprehensive inspection before or shortly after completion can identify defects that builders must rectify, giving you peace of mind that your hard-earned deposit has secured a home built to the proper standard.