Deposit Unlock scheme explained

The Deposit Unlock scheme helps first time buyers and home movers buy a new build home with a 5% deposit. We look at how it works, Deposit Unlock scheme mortgage options and whether it’s the best option for you.

Angela Kerr Director, Editor

What is Deposit Unlock?

Deposit Unlock allows you to buy a new build home from a participating home builder with just a 5% deposit, using a mortgage from a participating lender. These mortgages are only available via mortgage brokers. First time buyers and home movers can use the Deposit Unlock scheme.

While Deposit Unlock is still fairly new, it may prove popular with buyers as a way to purchase a new build home with a small deposit as lenders are often reluctant to offer high loan-to-value mortgages on new build homes.

It is also likely to fill the gap after the Help to Buy Equity Loan scheme, which let first time buyers purchase a new build home with a 5% deposit, closed to new applicants in October 2022.

Get expert fee-free advice on Deposit Unlock mortgages from our partners at award-winning mortgage brokers L&C.

How does the Deposit Unlock scheme work?

Mortgage lenders are often stricter on the amount they are willing to lend on the purchase of new builds. This is to protect themselves from the inevitable devaluation of the property in the early years and other risk factors. As such, they often set the minimum deposit for new build properties at 15% or even 25%.

Deposit Unlock gets round that and allows you to buy a new build with just a 5% deposit. With the Deposit Unlock scheme, the house builders pay to insure the mortgages instead. And they use some of the money from selling the homes for this purpose; the aim is to make lenders more comfortable about offering high LTV mortgages on new builds.

This scheme is exclusively for new build homes.

And the maximum loan you can take out to buy a property through the Deposit Unlock scheme is currently £750,000. Although this depends on the lender and your circumstances.

Read more about buying a new build home and new build mortgages.

Which home builders are signed up to Deposit Unlock?

To be eligible, you’ll need to find a new build home offered under the Deposit Unlock scheme with one of the following participating home builders:

Deposit Unlock Mortgages

There are currently only a few mortgage providers that will offer mortgages to people buying through the Deposit Unlock scheme: Nationwide, Newcastle Building Society and Accord. And these mortgages are only available via a broker.

Considering the Deposit Unlock scheme? Get expert fee-free mortgage advice from our partners at award-winning mortgage brokers L&C. They search the market to find you the best deal.

Nationwide Deposit Unlock mortgage

Nationwide offers loans on homes bought through the Deposit Unlock scheme up to £750,000, available through mortgage brokers.

In Spring 2024, Nationwide offers a 5 year fix at 95% LTV at 4.99% with an arrangement fee of £999 for those buying through Deposit Unlock. Or 5.14% with no fee. Both come with free valuation. First time buyer rates also carry a £500 cashback.

Nationwide also offers a 2 year fix Deposit Unlock mortgage at 5.39% with a £999 arrangement fee. Or 5.59% with no fee. Again, both come with free valuation.

However, you can only access these mortgages via a broker. So speak to a fee-free broker; they’ll run you through the latest rates too as these can change quickly.

Accord Mortgages Deposit Unlock mortgage

With Accord Mortgages, you can borrow up to £600,000 when buying a home through the Deposit Unlock scheme. But again, you’ll need to go via a mortgage broker to get access to the deals. In Spring 2024, Accord Mortgages offered a 5 year Deposit Unlock fixed rate of 5.32%, with an arrangement fee of £995. Or a fee-free rate of 5.51%. Both come with a free valuation and £250 cashback.

While if you’re looking for a 2 year fix, Accord Mortgages offers a rate of 5.84% with a £995 arrangement fee, or a fee-free rate of 6.16% with £250 cashback. Both come with a free valuation.

But rates are subject to change so speak to a fee-free mortgage broker to get the latest rates.

Newcastle Building Society Deposit Unlock mortgage

Newcastle Building Society was the first lender to announce a mortgage completion under the Deposit Unlock scheme in November 2021. This was part of a pilot scheme in North East England that involved properties with a maximum value of £330,000. Since then, Newcastle has increased its maximum loan amount to £750,000.

In Spring 2024 Newcastle Building Society offered Deposit Unlock mortgages at 5.20% for a 2 year fix with a £999 completion fee or a fee-free rate of 5.55%. For a 5 year fix, Newcastle Building Society offers a Deposit Unlock mortgage rate of 4.85% with a completion fee of £999 or a fee-free rate of 4.99%.

Again, rates are subject to change. And as these mortgages are only available through mortgage brokers, calling a fee-free mortgage broker to find out your options is advisable as one of your first steps.

What are the benefits of the Deposit Unlock scheme?

The main benefit of Deposit Unlock is that it is another scheme offering first time buyers – and home movers – access to 95% mortgages on new build properties.

However there are also limitations to the Deposit Unlock scheme: it is not suitable for individuals who would own another property on completion, for example a buy-to-let. Also, Newcastle Building Society says it will consider self-employed applicants, however it says it ‘will not consider any business that has been closed or received government funding during the pandemic’.

Considering the Deposit Unlock scheme? Get expert fee-free mortgage advice from our partners at award-winning mortgage brokers L&C. They search the market to find you the best deal.

Alternatives to Deposit Unlock – Own New Rate Reducer

There is another scheme designed to make it easier and cheaper to buy a new build home. The Own New Rate Reducer scheme allows you to buy a new build home with a mortgage and pay a lower mortgage rate than if you buy on the open market with a traditional mortgage. When you choose your property, the developer will agree to contribute 3% or 5% of the purchase price. House builders do this as an incentive for you to buy their properties. The developer’s contribution goes to your mortgage lender, via Own New. The lender will take the developer’s contribution of 3% or 5% and offset it against the mortgage interest to reduce your monthly payments for the first 2 or 5 years, depending on the length of your initial term. See our guide for more information on the Own New Rate Reducer scheme.

To buy a home through Own New you’ll need to speak to an approved mortgage broker. Speak to our partners at fee-free mortgage brokers L&C today to find out more.

Is Deposit Unlock a good idea?

Any scheme that can help people buy a home with a small deposit is worth looking into. However, it’s important to think about the limitations too. These include:

• Limited choice of properties: One of the main limitations of using this scheme is that you can only purchase a home from a participating builder. More than 35 of HBFs member house builders are part of the scheme which account for a significant percentage of all homes built in the UK. But it’s not clear if the builders will offer Deposit Unlock on all their sites or in selected sites only.
• Limited mortgage lender choice: At this early stage of the scheme, only three mortgage lenders are currently signed up. This means buyers may not always get access to the best mortgage rates on the market.
• New build premium: Beware the ‘new build premium’: lots of benefits of buying a new build disappear on the day you buy it as it is no longer ‘brand new’. And so, a one-year old property may fall in value as potential buyers consider other nearby new-builds. So our advice is, if you are buying a new-build, plan to live in it for the longer term.
• Speak to a fee-free mortgage broker first: The Deposit Unlock scheme isn’t the only way to get a mortgage with a 5% deposit. 95% mortgages are now more prevalent. And if you can’t get a 95% mortgage on a new build, why not consider buying an older property. If you go down this route you’ll have a much wider choice of property that you can buy and have access to a wider range of lenders too. So make sure you speak to a broker to explore your options.
• Investigate other options: Buying on the open market, whether it’s a new build or older property, without the assistance of a scheme, is by far the best option as you’ll have access to the best mortgage deals. So if you are lucky and have access to the Bank of Mum and Dad or time to save a little longer, then explore those options as well. Or you may consider shared ownership or the First Homes Scheme.

Get fee free advice on all your first time buyer mortgage options with our partners at L&C

Frequently Asked Questions