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The government-backed mortgage guarantee scheme helps buyers with a 5% deposit buy a home. We explain how it works, the eligibility criteria and what the alternatives are.
KEY INFORMATION
The mortgage guarantee scheme gives lenders a government-backed guarantee to encourage them to offer 95% mortgages. This has increased the supply of 5% deposit mortgages since the scheme launched in 2021.
More than 50,000 mortgages have been completed with help from the mortgage guarantee scheme, according to the Government’s Mortgage Guarantee Scheme Quarterly Statistics published in February 2025.
The mortgage guarantee scheme will end on 30 June 2025 and you can apply for a mortgage using the scheme until that date. The government’s Freedom to Buy Mortgage scheme is expected to replace it permanently but we await details of how this will work. Stay up to date by signing up to our newsletter.
If you apply for a 95% mortgage that’s backed by the mortgage guarantee scheme, the process will work in much the same way as if you’re getting a standard mortgage: you’ll need a 5% deposit, choose the type of mortgage you want and pay any mortgage fees like arrangement fees. However, eligibility criteria applies, read on for more on this.
For lenders using the mortgage guarantee scheme, the government guarantees the portion of the mortgage over 80%. This means they’ll cover some or all of the shortfall if your house is repossessed and sold for less than the outstanding mortgage amount.
To access a mortgage via the 95% mortgage guarantee scheme, you’ll need to meet the following eligibility criteria:
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
Major lenders taking part in the mortgage guarantee scheme include:
However, many lenders now offer 95% mortgages without using the government-backed mortgage scheme. For example, NatWest no longer uses the mortgage guarantee scheme. So don’t simply apply to a lender that offers the mortgage guarantee scheme. Speak to an expert mortgage broker who will shop around to find the best 95% mortgage deal for you.
If you take out a 95% mortgage you’ll need a 5% deposit. Here are some examples of how much deposit you will need.
| Purchase price | 95% mortgage amount in £ | 5% deposit amount in £ |
|---|---|---|
| £200,000 | £190,000 | £10,000 |
| £300,000 | £285,000 | £15,000 |
| £400,000 | £380,000 | £20,000 |
| £500,000 | £475,000 | £25,000 |
The government mortgage guarantee scheme isn’t something you apply for as such. It’s a deal that happens behind the scenes between the government and the lender. Here’s how the process of applying for a 95% mortgage works.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
Yes, if you take out a 95% mortgage with a 5% deposit, you’ll probably pay a higher rate than if you put down a 10% deposit or more. This is because lenders will see you as more risky than someone who puts more of their own cash into the property. So it’s extremely important to shop around. For the latest rates on 5% deposit mortgages (and for all deposit levels from 0%-40%) see our guide on the best First time buyer mortgage rates.
To illustrate, the following table compares how much you’ll pay on your monthly mortgage payments if you’ve got a 5% deposit, 10% deposit and 25% deposit, using the mortgage rates available in 2025 for each deposit level. The figures are based on taking out a £200,000 mortgage over 30 years and exclude any fees.
| Mortgage amount | Deposit % | Interest rate | Monthly mortgage payment in initial term |
| £200,000 | 5% | 5.29% | £1,109 |
| £200,000 | 10% | 4.88% | £1,060 |
| £200,000 | 25% | 4.27% | £986 |
The advantages of using the mortgage guarantee scheme, or getting any 95% mortgage, include:
Disadvantages of using the mortgage guarantee scheme:
If you’ve decided to take out a 95% mortgage, it’s important to note that if a lender is using the mortgage guarantee scheme, there is no direct benefit to you – the benefit is to the lender in terms of the government-backed guarantee that offers protection.
So there’s no reason to focus only on lenders that are signed up to this scheme. Make sure you look for the best deal for you – or even better, get a fee-free mortgage broker to do the legwork for you.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
There are a number of alternatives to the mortgage guarantee scheme, and other 95% mortgages, including:
If you’re not ready to buy yet, here are the steps you should take now to get yourself in the best position to buy:
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
The mortgage guarantee scheme will run until 30 June 2025. It was initially due to end in December 2022 but it was extended until 31 December 2023. However, in the 2023 Autumn Statement, the then Chancellor extended it again until June 2025.
HomeOwners Alliance Ltd is registered in England, company number 07861605. Information provided on HomeOwners Alliance is not intended as a recommendation or financial advice.
Mortgage service provided by London & Country Mortgages (L&C), Unit 26 (2.06), Newark Works, 2 Foundry Lane, Bath BA2 3GZ, authorised and regulated by the Financial Conduct Authority (FRN: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
HomeOwners Alliance Ltd is an Introducer Appointed Representative (IAR) of Seopa Ltd, for home insurance, authorised and regulated by the Financial Conduct Authority (FCA FRN: 313860).
HomeOwners Alliance Ltd is an Introducer Appointed Representative (IAR) of LifeSearch Limited, an Appointed Representative of LifeSearch Partners Ltd, authorised and regulated by the Financial Conduct Authority. (FRN: 656479).
Independent Financial Adviser service is provided by Unbiased, who match you to a fully regulated, independent financial adviser, with no charge to you for the referral.
Bridging Loan and specialist lending service provided by Chartwell Funding Limited, registered office 5 Badminton Court, Station Road, Yate, Bristol, BS37 5HZ, authorised and regulated by the Financial Conduct Authority (FRN: 458223). Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it.
