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Home NewsAdvice ClinicHow much deposit do I need to buy a house or flat?

How much deposit do I need to buy a house or flat?


As London Estate Agents with branches across London, we know how hard it can be for first-time-buyers to get on the property ladder but there may be good news just around the corner.

This year, the UK government has announced several financial measures to help homebuyers, ranging from the Stamp Duty holiday to Prime Minister Boris Johnson’s pledge to introduce a 5% deposit mortgage scheme for first-time buyers in 2023. But until then, how large a deposit does a first-time buyer need to take out a loan to buy a new home?

Working out the size of your deposit

Well, typically, a mortgage lender will expect buyers to have at least a 10% deposit although many ask for 15% or even 20%.

According to Rightmove, the average London house price over the last year was £654,301, up 5% on 2019. In London most property sales are flats and the average price for these over the last year was £568,694.This compares to a UK average house price of £323,530 (according to Rightmove’s National House Price Index) in October, an all-time national record.

So, for the average London flat priced at £568,694, a 15% deposit would be £85,304.

The larger your deposit, the greater the choice of mortgage providers and loans you will have and the lower the interest rate you’ll be charged, bringing significant cost savings over the mortgage term.

There are several schemes available to help first-time buyers, most notably the Help to Buy Scheme.

What is The Help to Buy Scheme?

The government’s Help to Buy Scheme is aimed at first-time buyers and existing homeowners who wish to buy a new-build property, providing part of the equity needed as a loan which means the buyer needs to borrow less from a mortgage company and needs a smaller deposit.

The scheme was due to end in December 2020 but, due to Coronavirus delays in building new homes, it has been extended to 28th February 2021, with the deadline for the legal completion of the sale remaining the same – 31st March 2021.For more information, go to

The new Help to Buy: Equity Loan Scheme (2021-2023)

The government’s new Help to Buy: Equity Loan Scheme (2021-2023), which replaces the current scheme, comes into force from 1st April 2021, running until March 2023. It will introduce property price caps and is restricted to first-time buyers.

Eligible buyers can borrow up to 20% (40% in London) for the purchase price of a new-build home. The builder must be registered with the scheme.

A 5% deposit is required and a repayment mortgage of at least 25% of the purchase price. No interest is charged for the first five years.

Buyers can apply for the new scheme from 16th December 2020. Go to for more information.

Generation Buy

Boris Johnson also recently pledged to introduce a new 5% deposit mortgage scheme for first-time buyers from 2023, stating he wanted to build more homes and make mortgages more affordable. The proposal would involve offering long-term fixed rate mortgage deals to first-time buyers with a 5% deposit but there has been no official announcement yet on this.

Stamp Duty holiday

You will probably know that the UK government have temporarily reduced Stamp Duty Land Tax which is ends March 31st 2021. Under the current scheme, purchasers who complete on a property (a main residence) valued at up to £500,000 before the March deadline will not pay any Stamp Duty. Find out more about this in our blog.

Sam Lee, Capricorn Financial

Taking the first steps to getting on the property ladder

If you’re planning your first property purchase, Sam Lee, Senior Advisor at Capricorn Financial, answers some important questions for first-time-buyers:

How much can I borrow against my salary? At the start of 2020 it was possible to borrow up to a 5, or even 5.5, times multiple of your income as a maximum loan. In the wake of Covid-19, lenders are acting more cautiously, and as such many banks are capping loans at 4 to 4.5 times income, however there do remain a handful of lenders willing to go up to a 5 times income multiple. Bonus and variable income can also be taken into account, however normally lenders will apply a ‘haircut’ to this income (for example considering 50% of a two year average), given this is not guaranteed.

What sort of information will I need to supply? The lenders will need enough information to conduct a credit search; so name, date of birth, and address history. They will also need a full breakdown of your income, expenditure, assets and liabilities. This all feeds into the lender’s affordability calculations.

What type of mortgage would be best for my circumstances? There are a wide range of mortgage products on the market, tailoring for borrowers of all circumstances. At Capricorn Financial, we’re able to provide an initial consultation, free of any charge or obligation, in order to better understand our clients’ needs and circumstances so we can recommend the right mortgage for them.

What costs/fees will I need to pay? The lender will often charge an arrangement fee, which on average will be around £1,000 – £1,500. Sometimes this fee will be inclusive of the valuation survey, though this is occasionally charged to the borrower. The borrower’s solicitor will of course have their own set of fees, and sometimes they will charge an additional fee for dealing with the mortgage lender in the transaction. Some brokers will charge up-front fees and some will charge upon a successful completion. This amount of which will depend on the client’s circumstances, but should always be communicated up front so it is important that you ask about fees at the outset.

Starting your property search

If you’re looking for your first home in London, contact our sales division to find out about how we can help, or take a look at our current properties for sale.


About the Author

Marc has been a board director since 2001 and oversees the company’s rental operations as well as developing new business. He is instrumental in the company’s expansion and works closely with Managing Director Anita Mehra to develop its core services. Read more about Marc von Grundherr here - Read full profile