Most first-time buyers in Cambridge need three things to get a mortgage: a deposit, usually at least 5% of the price, an income that supports the loan once the lender has checked your outgoings, and a clean set of paperwork. Start with an agreement in principle, which shows roughly how much a lender might lend you, then budget for the full cost of buying, including Stamp Duty on any part of the price above £300,000.
Cambridge prices make the numbers matter more than in most places. HM Land Registry's UK House Price Index for July 2026 (published 16 September 2026) puts the average price paid by first-time buyers in the Cambridge City Council area at £397,573, about 62% higher than the England first-time buyer average of £245,515.
An agreement in principle (also called a decision in principle or mortgage in principle) is a written statement from a lender estimating what you can borrow, based on the information you give it. It is not a mortgage offer and it is not guaranteed. Before making a formal offer, the lender will value the property and run much fuller checks on your finances, and it can lend less, or decline, if your circumstances have changed or there is an issue with the property.
It is still worth having before you view. It gives you a realistic budget, and shows sellers you are serious about buying.
Your credit history affects whether you are offered a mortgage and on what terms. You have a legal right to a free copy of your credit file from each of the three main credit reference agencies, Equifax, Experian and TransUnion (look for the "statutory report"). If anything is wrong, raise it with the agency, or with the lender that supplied the information. Lots of credit searches in a short space of time can suggest you are struggling to get credit and can affect a lender's decision, so avoid unnecessary credit applications before you apply for your mortgage.
Lenders must check that the mortgage is affordable, so expect to provide proof of your identity, your income and your outgoings and spending. If you are self-employed, lenders may ask for your SA302 tax calculations, which HMRC makes available for the last four years once your Self Assessment return has been filed. Check that your lender accepts copies you have printed yourself.
A lender's affordability assessment looks at your income and your regular outgoings, such as utility bills, insurance and Council Tax. It also considers changes that could affect your ability to pay, for example interest rates rising or losing your job.
Under the Financial Conduct Authority's rule MCOB 11.6.18R, lenders must take account of likely future interest rate rises over at least the first five years of the mortgage. The exception is a rate fixed for five years or more, where the rule does not require a stress test. Each lender designs its own test within that rule. After reviewing the rule in 2025, the FCA concluded that no further policy change was currently required. The Bank of England's separate stress test recommendation was withdrawn on 1 August 2022, so there is no single industry-wide test rate.
The Bank of England limits how many new mortgages lenders can approve at 4.5 times or more the borrower's income, so most lending is below that level: across all lenders, the high loan-to-income share was 14.1% in the latest quarter reported in September 2026. First-time buyers do borrow at these higher multiples more than other buyers: the Bank's Financial Policy Committee reported in September 2026 that 18.1% of first-time buyer lending in the latest quarter was at high loan-to-income ratios, against 10.9% for other mortgages.
As a simple illustration (not a lender's calculation), buying a £400,000 home with a 5% deposit means borrowing £380,000, which needs a household income above about £84,444 to stay under 4.5 times. With a 10% deposit you would borrow £360,000, needing an income above £80,000. Your own figure will depend on your outgoings, any debts and the lender's criteria.
Loan to value (LTV) is the mortgage as a percentage of the property's value. A 5% deposit means a 95% LTV mortgage. Under the government's Mortgage Guarantee Scheme rules, for example, the value is the lender's valuation or the purchase price, whichever is lower, so a low valuation can mean you need a bigger deposit. You pay for the lender's valuation, usually in advance when you apply. It is not a survey, so consider your own.
High LTV lending has become more common. Bank of England figures for April to June 2026 show 8.4% of new mortgage lending was above 90% LTV, the highest share since 2008. Lending above 95% LTV exists but is rare, at 0.5% of new lending in the same quarter.
The deposit you pay at exchange of contracts is often 10% of the price, but it can vary. If you are buying with a 5% deposit, agree the exchange deposit with the seller through your conveyancer early.
The government's Mortgage Guarantee Scheme has been permanently available since July 2025. It gives participating lenders a government guarantee on mortgages above 90% and up to 95% LTV, so that first-time buyers and home movers can buy anywhere in the UK with a deposit as small as 5%. The scheme only covers repayment mortgages on a home at least one buyer will live in. Interest-only, buy-to-let, offset and guarantor mortgages are excluded, as are shared ownership and shared equity purchases. You do not apply to the scheme yourself; you take a 95% mortgage from a lender that participates.
A Lifetime ISA lets you save up to £4,000 a year, with a 25% government bonus of up to £1,000 a year. You must be 18 or over and under 40 to open one. To use it for your first home, the property must cost £450,000 or less, you must buy at least 12 months after your first payment in, you must buy with a mortgage, and the money is paid to your conveyancer or solicitor. If you take money out for any other reason (apart from reaching 60 or terminal illness), you pay a 25% withdrawal charge, which takes back more than the bonus: £800 saved becomes £1,000 with the bonus, but withdrawing it all leaves you with £750.
The government consulted from June to August 2026 on a new First Time Buyer ISA that will eventually be offered in place of the Lifetime ISA. Until it is available, you can still open a Lifetime ISA and existing holders can keep saving into it indefinitely. The new product's savings limit, bonus and price cap are due to be announced at a future fiscal event.
Shared ownership lets you buy a share of a home, usually 25% to 75% and sometimes 10%, and pay rent on the rest. Household income must be £80,000 or less outside London. The First Homes scheme in England sells some new homes to eligible first-time buyers at 30% to 50% below market value, with a household income limit of £80,000 outside London and a maximum price of £250,000 after the discount; councils can set lower caps and local criteria. Since December 2024 councils no longer have to secure a set share of First Homes, so availability varies.
On 26 September 2026 the government announced a new equity loan scheme for England, Your First Home, to be confirmed at the Budget on 28 October 2026. It is expected to support 2.5% deposits with a 20% government-backed equity loan on new-build homes from developers that sign up, with an income cap and local price caps. The details, including when it opens, have not yet been published, so do not plan around it until they are.
Since 1 April 2025, first-time buyers in England and Northern Ireland pay no Stamp Duty Land Tax on the first £300,000 and 5% on the portion from £300,001 to £500,000. If the price is over £500,000 the relief does not apply at all and you pay the standard rates. Everyone you are buying with must be a first-time buyer, which means never having owned a home anywhere in the world, including one inherited or gifted.
Wales and Scotland have their own taxes instead. Buyers who are not UK resident usually pay a 2% surcharge. For the other costs, such as legal fees, searches and surveys, see our guide to the hidden costs of buying a home.
With a repayment mortgage, each monthly payment covers interest and part of the loan, so the debt is cleared by the end of the term. With interest-only, you pay just the interest and must repay the whole loan in one go at the end, so you need a credible plan to do that.
At the time of writing (October 2026), Bank Rate is 3.75%. The Bank of England held it on 17 September 2026 by a 6 to 3 vote, with three members voting to raise it to 4%, and said that the longer energy price volatility persists, the more likely it is that it will need to raise Bank Rate. The next decision is due on 5 November 2026. A fix gives certainty over your payments; a tracker passes any change straight through. We do not recommend particular lenders or products, and rates change frequently, so compare current deals with a broker or lender.
Many mortgages carry fees, such as an arrangement or product fee, and you also pay for the lender's valuation. Some lenders let you add the arrangement fee to the loan, which means paying interest on it and pushing up your LTV. Compare deals on their total cost over the deal period, including fees and the rate you would move to afterwards, not just the headline rate.
Fixed, capped and discounted rate deals often come with early repayment charges if you pay off a lump sum, repay the mortgage or switch to another deal before the special rate ends. The charging period can sometimes run beyond the end of the special rate, so check your mortgage offer for the exact terms.
A broker can save you time shopping around, but some lenders offer deals only direct to customers, so it can still pay to look further. A broker must tell you if they can only recommend from a limited range of lenders rather than the whole market, and must tell you what they charge and when you pay. Firms providing residential mortgage services must be authorised by the FCA, so check the firm on the FCA's Firm Checker or Financial Services Register. If you use a firm that is not authorised, you will not have access to the Financial Ombudsman Service if you need to complain, or protection from the Financial Services Compensation Scheme if it fails.
You do not have to use a broker an estate agent recommends. If you would like a starting point, we have a page that lists two independent brokers we recommend.
The UK House Price Index for July 2026 shows:
Three thresholds matter here. The overall Cambridge average is above the £450,000 Lifetime ISA limit, while the first-time buyer averages for both Cambridge and South Cambridgeshire are below it. Both are above the £300,000 point where first-time buyer Stamp Duty starts, and below the £500,000 point where the relief is lost. The index is based on completed sales, so it lags the market, and the latest months are provisional and can be revised, especially for smaller areas. For more on local price trends, read what's really happening to Cambridge prices, and compare the city with the surrounding villages in our Cambridge area guides. When you are ready to start viewing, browse houses for sale in Cambridge.
This article is general information, not financial advice. Speak to an FCA-authorised mortgage adviser about your own circumstances.
Each lender sets its own validity period, so check the expiry date. If it runs out before you find a home, you can apply for a new one with the same lender or another.
A soft credit search does not affect your score, but some lenders use a hard search, which can. Check with the lender or broker first, especially if you plan to apply to more than one.
Yes, if a lender approves you for a 95% mortgage, for example through the government's Mortgage Guarantee Scheme. On a £400,000 home that is £20,000, plus Stamp Duty of £5,000 and your other buying costs. A bigger deposit lowers your LTV and the amount you need to borrow.
Often, yes. First-time buyers pay nothing up to £300,000 and 5% on the portion from £300,001 to £500,000. Above £500,000 the relief does not apply. The average first-time buyer price in Cambridge was £397,573 in July 2026, so many buyers will pay some.
Yes, if the home costs £450,000 or less, you buy with a mortgage and at least 12 months have passed since your first payment in. If the price is over £450,000, taking the money out triggers the 25% withdrawal charge.
It depends on your income, outgoings and the lender's stress test. Because the Bank of England limits lending at 4.5 times income or more, most mortgages are below that multiple, though some first-time buyers do borrow more.
