What is deposit unlock?

Deposit Unlock is a new scheme to help first time buyers and home movers buy a new build home with a 5% deposit. Check out our guide to ensure it is the right option for you.

What is Deposit unlock?

With the new Deposit Unlock scheme, first time buyers and home movers can buy a new build home with just a 5% deposit.

You can only buy a home from a house builder participating in Deposit Unlock (see a list below) and using a mortgage offered by a participating lender (currently Newcastle Building Society and Nationwide).

How does the 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 Deposit Unlock, 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 this scheme is currently £750,000. Although this depends on the lender and your circumstances.

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:

• Barratt Homes
• Barratt London
• Bellway
• Bewley
• Bloor Homes
• City & Country
• Countryside Properties
• Crest Nicholson
• Croudace
• Davidson Group
• David Wilson Homes
• Devine Homes
• Edenstone Holdings
• Fairview
• Hayfield Homes
• Hill
• Keepmoat Homes
• Mandale Homes
• Miller Homes
• Morris Homes
• Nicholas King Homes
• Norfolk Homes
• Pat Munro
• Persimmon
• Prospect
• Redrow
• St Modwen Homes
• Taylor Wimpey
• Thakeham
• Vistry
• Wheeldon

Deposit Unlock Mortgages

There are currently only a few mortgage providers under the Deposit Unlock mortgage scheme: Nationwide, Newcastle Building Society and Accord.

What are the benefits of Deposit Unlock?

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.

When the government backed equity loan scheme comes to an end in 2023 we expect Deposit Unlock will see a lot of interest.

And unlike the government scheme, there aren’t additional affordability stress tests when taking out a mortgage, which factor in the servicing of the Help to Buy loan after the first five years.

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:

1. 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 25 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.
2. Limited mortgage lender choice: At this early stage of the scheme, only two mortgage lenders are currently signed up to the scheme. This means buyers may not always get access to the best rates on the market.
3. 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.
4. Speak to a fee-free mortgage broker first: Deposit Unlock 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.
5. 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.