A 2% deposit sounds like the answer to one of the biggest first-time buyer problems. But a small deposit and a mortgage that is genuinely affordable are two different things — and understanding that distinction can save buyers a lot of frustration.
On 30 September 2026, Cambridge Building Society announced that its five-year fixed First Step mortgage, available up to 98% loan-to-value (LTV), had been made available across the intermediary market. The lender’s current criteria also say First Step can consider borrowing of up to 5.5 times income, subject to affordability and its wider lending rules.
What has changed?
The latest announcement is not simply another low-deposit headline. It widens access to a five-year fixed option within a range designed specifically for first-time buyers. Cambridge says the mortgage requires a minimum 2% deposit, while gifted deposits from specified close family members can also be considered.
The lender’s published First Step criteria currently state a maximum loan of £500,000, repayment basis only, a minimum property value of £100,000 and a maximum term of 40 years. New-build houses can be considered up to 98% LTV, although new-build flats are not accepted under First Step. The range cannot be combined with other first-time buyer schemes such as Shared Ownership.
Why the deposit is only half the story
A buyer may have enough cash for a 2% deposit but still fail a lender’s affordability assessment. Income, regular commitments, credit history, household costs, mortgage term and the lender’s stress testing can all affect the maximum mortgage available.
For example, on a £300,000 purchase a 2% deposit would be £6,000, leaving a £294,000 mortgage requirement. If the applicants’ combined income were £60,000, a headline maximum of 5.5 times income would suggest a theoretical ceiling of £330,000. That does not mean the lender will automatically offer £294,000: the full affordability assessment and property criteria still have to work.
This is why an early affordability review can be more useful than focusing on deposit size alone. TLA Finance’s first-time buyer mortgage guidance explains the wider budget buyers should consider, while our main mortgage advice page covers a broader range of borrowing circumstances.
What should a first-time buyer check before relying on a 98% mortgage?
- Whether the required loan is affordable after the lender assesses income and commitments.
- Whether the property type fits the lender’s criteria, particularly for new-build flats.
- How much cash is still needed for legal fees, surveys, moving costs and any other purchase expenses.
- Whether a very small deposit leaves enough financial buffer if the valuation comes in below the agreed purchase price.
- Whether the monthly payment and total cost over the chosen mortgage term remain comfortable.
The wider significance
For some renters, the barrier to buying is not the ability to manage a monthly housing payment but the time needed to build a large deposit. High-LTV products can therefore open a route that may not previously have been practical. At the same time, borrowing at 98% LTV means starting with very little equity, so suitability, price, valuation and a realistic monthly budget matter even more.
The useful question is not simply, “Can I buy with 2% down?” It is, “Do my deposit, income, commitments and chosen property all fit together well enough for a lender to approve the mortgage comfortably?”
If you are planning a first purchase and want to understand your likely budget before making an offer, you can contact TLA Finance to discuss your circumstances.
Sources checked: Cambridge Building Society announcement, 30 September 2026; Cambridge for Intermediaries First Step lending criteria, accessed 3 October 2026; Cambridge Building Society First Step product page, accessed 3 October 2026.
Preparation note: This article was prepared with AI assistance and reviewed against the lender’s published information and TLA Finance’s editorial standards before publication.
This article is for general information only and is not personalised mortgage advice. Mortgage availability, rates and criteria can change and all applications are subject to lender affordability, credit assessment, valuation and underwriting. Your home may be repossessed if you do not keep up repayments on your mortgage.
