What is the Deposit Unlock mortgage scheme for new-build homes?

Full answer

New-build homes have traditionally been harder to mortgage at high loan-to-value ratios than existing properties, because lenders are often more cautious about new-build valuations (given the premium new-build prices can carry compared with equivalent second-hand homes, and the risk of that premium eroding once the property is no longer "new"). Deposit Unlock is an industry-backed scheme, supported by a number of housebuilders and mortgage lenders, designed to address this by providing an insurance-style indemnity that protects the participating lender against losses if the borrower defaults and the property has to be repossessed and sold for less than the outstanding mortgage — similar in concept to the mortgage indemnity guarantees that were common in the market decades ago. This indemnity, funded through a contribution from the housebuilder (rather than the buyer directly), gives participating lenders the confidence to offer mortgages on new-build houses and flats at up to 95% loan-to-value (a 5% deposit), broadly matching what is achievable for an equivalent existing-stock property, rather than the more restrictive 85-90% loan-to-value ceilings that some lenders apply to new-build specifically. Buyers do not pay for the indemnity themselves — the cost is built into the scheme's funding by the housebuilder and lender, though critics note this cost is ultimately factored into the overall economics of the new-build sector rather than being genuinely free. Eligibility depends on both the specific development being registered with the scheme (not all new-build sites participate) and the buyer meeting the participating lender's normal affordability and credit criteria — Deposit Unlock addresses the deposit/loan-to-value barrier specifically, not general affordability. Because relatively few lenders participate in Deposit Unlock compared with the whole mortgage market, buyers should compare the overall product (rate, fees, total cost) against what a slightly larger deposit and a mainstream mortgage might achieve, rather than assuming the scheme is automatically the cheapest route onto a new-build.

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