Low-deposit deals pulled as the war jolts mortgage rates

Why low-deposit deals are disappearing

Lenders have pulled 204 low-deposit mortgages — the deals needing only a 5% deposit that first-time buyers rely on — since 6 March 2026. One Saturday alone saw 52 products withdrawn, the biggest single-day fall since the September 2022 mini-Budget, with another 30 gone by the morning of 24 March.

The cull goes wider than first-time-buyer deals. The number of residential mortgages on the market has dropped 21% in under three weeks, from 6,144 to 5,856, as lenders repriced or paused ranges they could no longer cost with confidence.

What pushed rates up so fast

Before the US-Israel war with Iran began on 28 February, markets expected the Bank of England to keep cutting through 2026, and fixed rates were edging down. The conflict reversed that: funding costs jumped and the average two-year fixed rate climbed to 5.51%, up from 4.83% on 26 February, just before the strikes. The average five-year fix rose to 5.52% from 4.95% over the same window.

The squeeze is sharpest at the small-deposit end. The average two-year fix for a buyer with a 5% deposit is now above 6% — roughly £1,200 a year more than in early March on a £250,000 mortgage over 25 years. If you’re weighing up a deal, the LTV calculator and borrowing calculator are a sensible first stop.

The Bank held — but didn’t blink

The Bank of England held base rate at 3.75% on 19 March in a unanimous vote. Governor Andrew Bailey pushed back on markets betting on rate rises, saying they were “getting ahead of themselves” and that “the right place to be is on hold”, even as inflation was expected to climb on higher energy costs.

For borrowers, the takeaway is less about the headline base rate and more about volatility: in a fast-moving market, the cheapest deals have a short shelf life, and an advised broker can move quickly when one appears.

What it means if you’re buying with a small deposit

A thinner choice of low-deposit deals doesn’t mean the door is closed — it means timing and preparation matter more. Getting your paperwork ready and your borrowing agreed in principle puts you in a position to act when the right rate lands.