New £5,000 deposit mortgage unveiled by Lloyds and Halifax | Personal Finance | Finance

Britain’s biggest mortgage lender has launched a new deal allowing first-time buyers to get on the property ladder with just a £5,000 deposit – as banks step up efforts to revive the housing market with lower rates.

Lloyds Banking Group, which incorporates Halifax, said the move would open the door to home ownership for thousands who can afford monthly repayments but are locked out by the huge upfront costs of buying. It comes amid a wave of recent mortgage rate cuts from major lenders designed to support first-time buyers, as competition intensifies and expectations grow for further base rate reductions this year.

A foot on the ladder with just £5,000

Under the new deal buyers can purchase a property worth up to £300,000 with a minimum deposit of just £5,000 – equivalent to a 98% loan-to-value (LTV) mortgage. The product, available through Lloyds Bank and Halifax as well as brokers, will launch on May 18 with a five-year fixed rate of 5.89%.

It is aimed squarely at renters who are already shouldering high monthly housing costs but struggle to save tens of thousands of pounds without help from family.

Lloyds said it expects the scheme to deliver an extra £500m of lending to first-time buyers over the next year.

Why are rates easing now?

The launch comes as lenders have been trimming mortgage rates in recent days, with a number of high street banks cutting fixed deals to make borrowing more affordable.

These reductions – alongside fierce competition for new customers – are part of a broader push to help first-time buyers, who have been squeezed by high living costs and rising rents.

Despite this, the deposit hurdle remains the biggest barrier.

Around 64% of aspiring buyers say saving for a deposit is the hardest part of purchasing a home, while only about 40% can rely on family support.

Key features of the new mortgage include:

• Minimum deposit: £5,000
• Maximum LTV: 98%
• Interest rate: 5.89%
• Fixed term: 5 years
• Loan-to-income cap: 4.5x
• Term: up to 40 years
• Fees: none

Strict affordability and credit checks will apply, and the deal is not available for new builds, shared ownership or those using gifted deposits.

Rent vs mortgage: the reality check

Lloyds says the product reflects a growing trend where mortgage repayments are increasingly similar to – or even cheaper than – rents.

In Manchester, one of the UK’s most popular cities for first-time buyers:

• Average first-time buyer property: £236,000
• Monthly mortgage (with £5,000 deposit): about £1,300
• Average rent: £1,347 per month

Over five years, a buyer could build around £11,500 in equity, even if house prices do not rise.

Buyers stuck in a savings trap

Today’s first-time buyer is now aged 32 on average – two years older than a decade ago. While 63% of would-be buyers have already saved more than £5,000, some 58% believe they need over £20,000 before they can realistically buy.

By slashing the upfront requirement, lenders hope to cut years off that timeline.

Amanda Bryden, head of mortgages at Lloyds, said: “We hear time and again from those who are doing everything right… but still feel locked out of home ownership because saving a big enough deposit seems impossible. By cutting the upfront cost to £5,000 we’re breaking down a major barrier.”

Regional house prices snapshot

The affordability challenge varies sharply across the UK. Here is how average first-time buyer property prices compare:

Source: Halifax House Price Index, March 2026

The new deal underlines a shift in the mortgage market, with lenders increasingly targeting first-time buyers through a mix of lower rates and innovative low-deposit products.

But while deals like this could help thousands step onto the ladder sooner, borrowers are still being warned to weigh up the risks of high LTV mortgages – particularly if house prices fall.

Rachel Geddes, Strategic Lender Relationship Director, Mortgage Advice Bureau said: “It’s hugely encouraging to see a major high street lender making such a significant commitment to supporting first time buyers. Unlocking up to £500m in additional lending, alongside a £5,000 deposit option, is a positive step towards breaking down some of the barriers preventing aspiring homeowners from getting onto the property ladder.”

Jamie Alexander, Mortgage Director at Romsey-based Alexander Southwell Mortgages, said it was encouraging to see a lender of Lloyds’ size targeting this market.

But he warned: “The £300,000 purchase price cap is worth noting, though. For buyers in many parts of the UK that’s workable, but in London and the South East it will put a significant chunk of the market out of reach, which is arguably where the deposit struggle is felt most acutely.