The deposit unlock scheme is the first UK home ownership scheme of its type, as it was devised without any government involvement.
Created via a collaboration between The Home Builders Federation (HBF), Gallagher Reinsurers and a handful of mortgage lenders, it enables both first-time buyers and home movers to purchase new-build homes with just 5% deposit.
With the government’s Help to Buy scheme now closed to applicants in England and no direct replacements for the scheme planned outside of Wales, this scheme intends to replace some of the benefits for those looking to buy a new-build property.
Outside of the help to buy scheme, those looking to buy a new build home typically require around a 15% deposit in order to qualify for a mortgage. This is due to the ‘new build premium’, which refers to the higher cost of buying a brand new home, compared to a quicker than average decline in value, due to not being brand new when it is sold on.
The scheme allows buyers to select one of the homes assigned to the deposit unlock scheme by one of the 50 participating housebuilders across the UK with a 95% mortgage from one of the associated lenders.
It can be used to purchase both houses and flats with two bedrooms or more up to the value of £833,250, depending on your personal circumstances and ability to qualify for the relevant sized mortgage.
You can be a first-time buyer or buying a new home, but the scheme can only be used for your main and only home
You will need to meet all of the qualifying criteria for at least one of the participating lenders
Anderson Design & Build
CALA Homes Limited
City & Country Homes
David Wilson Homes
Gleeson Build & Develop Limited
MJ Gleeson PLC
Nicholas King Homes
Pat Munro Homes
St Modwen Homes
Weston Homes PLC
Nationwide Building Society
Newcastle Building Society
It is also expected that additional lenders will join the scheme in the coming months
Each of the three existing lenders at the time of writing offer some form of incentive as part of their deposit unlock products, such as free valuations or cashback, but offers are subject to change.
All deals are available exclusively via a mortgage broker, so you will not be able to go to any of the participating lenders directly for a deposit unlock mortgage.
Like any mortgage or home ownership scheme, whether or not they are the most suited to your needs will depend on your individual circumstances and exactly what you’re looking for. There are also both benefits and drawbacks, which will need to be considered alongside your goals and finances, before you make a decision:
You can buy a brand new house or flat with two or more bedrooms with just 5% deposit
You don’t need to be a first-time buyer (unlike the majority of home ownership schemes)
Regional price cap restrictions do not apply
There is no income limit for borrowers
New build properties use less energy than older homes, meaning lower utility bills
You can only choose scheme properties, which may not be in your preferred areas
There are currently only three lenders able to offer this type of mortgage, which limits your opportunity to qualify for a loan and may receive less competitive rates
New build homes lose value more quickly than pre-owned home, as you will pay a premium for it being brand new, which will no longer apply when you sell it
The disadvantages will really depend on your preferences. If your main goal is to own a brand new property, the fact that it may not be in your first choice of area and will lose value quickly won’t be too much of an issue, especially if you plan to stay there for a long time.
Equally, if you don’t have any concerns about being accepted for a mortgage, then the fact that only three lenders are currently offering them should not be too much of a deterrent. If you have bad credit, or feel that you may struggle to qualify for a mortgage, it could be more of a concern. That said, more lenders are expected to join the scheme in time.
Yes, unlike the majority of home ownership schemes, the deposit unlock scheme is not limited to first-time buyers, or to those on a limited income. However, you must be purchasing your main and only property.
Affordability will be calculated the same way as it would for any other type of mortgage, although each lender has its own specific method. Typically you’re able to borrow around 4.5 times your annual household income.
Our mortgage affordability calculator will help you to figure out how much you may be able to borrow using your income details and current deposit figure.