Deposit unlock explained

Deposit Unlock is a new scheme to help first time buyers and home movers buy a new build home with a 5% deposit. But is it your best option? We look at how it works, who is eligible, how to buy under the scheme, mortgage options and how it compares to your other options, including Help to Buy.

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).

This scheme was developed by the Home Builders Federation, the body that represents housing developers, along with reinsurance firm Gallagher Re.

While the scheme is still very 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 when the Help to Buy Equity Loan scheme, which lets first time buyers purchase a new build home with a 5% deposit, comes to an end in 2023.

How does Deposit Unlock 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.


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

  • Bellway

  • Bewley

  • Bloor Homes

  • Countryside Properties

  • Crest Nicholson

  • Croudace

  • Davidson Group

  • Fairview

  • Hill

  • Persimmon

  • Redrow

  • Taylor Wimpey

  • Vistry

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.

However, with so many good mortgage rates currently available to borrowers and the existence of the Equity Loan Scheme (under which you have more mortgage choice), there isn’t an overwhelming case for using Deposit Unlock at present. The major benefit for homebuyers comes when the Help to Buy Equity Loan scheme ends next March. After that time, it may be more difficult to buy a new build home with a 5% deposit.

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, some lender's will not lend to self-employed applicants using Deposit Unlock.  Some lender's will not consider any business that has been closed or received government funding during the pandemic.

Help to Buy Equity Loan vs Deposit Unlock

Both the Help to Buy Equity Loan scheme and Deposit Unlock allow you to purchase a new build home with a 5% deposit. However, there are some major differences when trying to work out which scheme is best for you:

  • The first difference is that with the Help to Buy Equity Loan scheme, the government lends you up to 20% of the value of the property, or up to 40% of the value of the property if it’s in London. This is interest free for the first 5 years. And you’ll take out a mortgage on the rest. However, with Deposit Unlock you’ll just be taking out and paying off a 95% mortgage from the start.

  • You’ll typically have a lot more mortgage choice when using the equity loan scheme

  • If you use the Help to Buy Equity Loan scheme and then sell your home before paying back the equity loan, you’ll need to pay it back when you sell. The amount you’ll need to repay is calculated as a percentage of whichever is highest – the agreed sale price or the current market value. You’ll be responsible both for obtaining this valuation and making sure that the surveyor you use is a RICS qualified member. You’ll also need to pay a £200 admin fee to complete the process. By comparison, there is nothing as yet to suggest there will be any more administrative hurdles to get over when selling a property you’ve bought through Deposit Unlock than you would when selling any standard property.

  • The Help to Buy Equity Loan scheme is now only open to first time buyers whereas home movers can also apply for Deposit Unlock.

  • Regional price caps apply with the Help to Buy Equity Loan scheme, from a maximum of £186,100 in the North East to a maximum of £600,000 in London. With Deposit Unlock, the maximum loan size you can take out is £750,000, although it does vary by lender.

  • And crucially, the Help to Buy Equity Loan scheme is due to end in March 2023.

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. The Home Builders Federation says 17 of its member house builders are part of the scheme and that these companies are responsible for 60% 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 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.

  • 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.

  • 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.

Mortgage321 is an independent mortgage broker with access to the whole of the market. 

For more information contact us.

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