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A new permanent Mortgage Guarantee scheme has been launched to encourage lenders to supply 5% deposit mortgages. We explain how it works, the eligibility criteria and what the alternatives are.
KEY INFORMATION
The original mortgage guarantee scheme was launched in 2021 and designed to give lenders a government-backed guarantee to encourage them to offer 95% mortgages after they’d all but disappeared during the pandemic.
More than 53,000 mortgages have been completed with help from the mortgage guarantee scheme, according to the Government’s Mortgage Guarantee Scheme Quarterly Statistics published in May 2025.
There have been quite a few iterations of the Help to Buy Mortgage Guarantee scheme since 2013. It’s confusing. You don’t need the details, but for completeness, the previous mortgage guarantee scheme closed on 30 June 2025. The government then launched the new permanent mortgage guarantee scheme in July 2025.
In Labour’s 2024 General Election manifesto, they called it the Freedom to Buy scheme. However, perhaps realising they wouldn’t get credit for claiming an old scheme is new, the government decided to stick with the existing name: mortgage guarantee scheme. Confused? Yes they haven’t made it easy.
Although the schemes are very, very similar, we think we may have spotted a difference. While the original mortgage guarantee scheme had limits on the value of property you could buy with it, it’s not clear if this is the case with the new permanent mortgage guarantee scheme. Read on for more on this and Stay up to date by signing up to our newsletter.
In any case, the government mortgage guarantee scheme isn’t something you apply for. It’s a deal that happens behind the scenes between the government and the lender. So it’s not something you need to look out for and research.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
If you apply for a 95% mortgage that’s backed by the new mortgage guarantee scheme, the process will work in much the same way as if you’re getting a standard mortgage. You’ll need:
However, eligibility criteria applies, read below 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.
Under the original mortgage guarantee scheme, properties had to be worth £600,000 or less. This means the maximum amount you could borrow on a mortgage if using this scheme was £570,000.
Although some lenders may set lower thresholds. For example, Barclays will lend up to £310,000 if you’re buying a flat.
However it’s not yet clear whether any property price thresholds apply to the new mortgage guarantee scheme.
Major mortgage 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, expect to 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.
| Deposit % | Interest rate | Monthly mortgage cost |
| 5% | 4.73% | £1,041 |
| 10% | 4.36% | £997 |
| 25% | 3.92% | £946 |
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 original mortgage guarantee scheme closed on 30 June 2025 but the government’s new permanent mortgage guarantee scheme launched in July 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.
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