95% mortgage guarantee scheme

What is the mortgage guarantee scheme?

The mortgage guarantee scheme involves the government 'guaranteeing' 95% mortgages for buyers with 5% deposits.

The scheme was launched in April 2021 in an attempt to encourage banks to start offering 95% mortgages again, after nearly every single one was withdrawn during the pandemic.

Under the terms of the scheme, the government takes on some of the financial risks faced by banks that offer these deals, such as the cost of borrowers defaulting on their payments. This might sound complicated, but in practice it just means the government will partially compensate the lender if a homeowner defaults on (fails to pay) their mortgage.

The initiative was due to end in December 2023, but it has been extended until the end of June 2025.

• Find out more: what is a 95% mortgage?

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Who is eligible to apply?

The mortgage guarantee scheme is available to first-time buyers and home movers across the UK.

You must be buying a property to live in yourself - second homes and buy-to-let properties are not permitted. Both new-build and existing properties priced up to £600,000 are eligible.

You'll need to apply for a repayment (not interest-only) mortgage and pass standard affordability checks, including a loan-to-income test and credit score assessment.

Finally, the mortgage you're applying for must be for between 91% and 95% of the value of the property you're buying, which you'll see described as 'LTV'.

• Find out more: loan to value (LTV) calculator

95% mortgage calculator: how much can you borrow?

Alternatives to the mortgage guarantee scheme

Generally speaking, the higher the proportion of the property price you borrow, the higher the rate of interest you'll pay on your mortgage.

For that reason, if you're able to save for a little longer and apply for a standard 90% mortgage it could be well worth it in the long run.

There are some other schemes that can help you buy a home with a small deposit.

• If you're looking to buy a home in an expensive area such as London, a shared ownership scheme could offer you a route on to the ladder. These schemes involve purchasing a stake of as little as 25% of a property and paying rent on the remainder. A word of warning, though - the overall monthly costs of shared ownership schemes can be high.
• Lenders currently offer a range of guarantor mortgages, which allow a parent or family member to help you buy a home. Guarantor mortgages usually involve the family member using their home or savings as collateral in case you default on your mortgage, but innovative products such as 'joint borrower sole proprietor' mortgages could be an alternative for some.
• First-time buyers in Wales can benefit from the Help to Buy scheme which offers a 20% equity loan from the government. All homes bought through the scheme must not cost more than £300,000 and they need to have a minimum Energy Performance Certificate (EPC) rating of B. It is set to run until March 2025, having already been wound down in England. Northern Ireland and Scotland also don't offer it.

Find out more: how to buy a house