The little-known scheme helping first-time buyers without Bank of Mum and Dad afford a new-build house

• For many young people, owning their own home feels like an impossible dream
• But there is a scheme helping first-time buyers which few people know about
• It can halve the amount they need to save for a deposit

For many first-time buyers, the dream of getting their own home feels increasingly out of reach.

But with the Help to Buy Scheme closing in 2023, one little-known initiative is offering fresh hope to aspiring homeowners.

What is Deposit Unlock?

Deposit Unlock is a private scheme developed by the Home Builders Federation in collaboration with lenders and major developers in the UK.

It allows first-time buyers (and even some home-movers) to buy a new-build home with just a 5% deposit, thanks to an insurance-backed guarantee for lenders.

With the average UK house price now £271,000 most first-time buyers face monthly repayments of around £1,150 on a 25-year term, assuming a 20% deposit of £54,200.

However, while the average new-build in England costs £463,000, a buyer using the Deposit Unlock scheme would need to find £23,150 – about half the amount needed for a standard property.

How does Deposit Unlock work?

Phillippa Jackson, operations director at Purplebricks Mortgages, said: “What makes Deposit Unlock different is that it’s not government-run, and it isn't restricted to shared equity or rent-to-own models. Instead, it gives buyers access to 95% mortgages.”

She explained how mortgage lenders have historically been more cautious about offering 95% mortgages on new-build properties due to concerns over valuation and resale.

But with housebuilders covering the insurance, lenders feel more confident extending higher loan-to value offers.

“It’s a smart workaround that opens the door to many buyers who might otherwise be excluded,” added Ms Jackson.

Unlike a joint mortgage or gifted deposit, Deposit Unlock does not rely on family support - a major plus for buyers without the access to the ‘Bank of Mum and Dad’.

Who is eligible for help buying a house?

First-time buyers, and some existing homeowners, are eligible for the scheme. So too are new-build purchases from a participating developer.

Ms Jackson said: “Buyers will need to meet the standard authority checks, but the key difference is that lenders participating in Deposit Unlock will offer high loan-to-value deals specifically for eligible new builds, which isn't the norm elsewhere.

“Not all developers are part of the scheme, so you’ll need to check if your chosen builder offers Deposit Unlock and apply through a participating mortgage provider.”

While there is no fixed government cap, many developers limit properties to under £750,000, in line with typical affordability and insurance rules.

What are the risks?

Ms Jackson adds: “Just because you can buy with a 5% deposit doesn't mean you should rush in.

“A smaller deposit means higher loan-to-value, which can affect your interest rate and your equity buffer if house prices dip.

“It’s important to weigh up the pros and cons with a qualified mortgage adviser.”

“Deposit Unlock isn't a solution, but it’s a clever tool that can give first time buyers a shot at owning a new build.

“Schemes like Deposit unlock are great, but they aren't shortcuts. They’re stepping stones. The key is to make sure you're stepping in the right direction.”

Do you have any tips when it comes to saving for your first home? Let us know in the comments section.

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