Mortgage guarantee scheme – key facts at a glance
The UK Government has confirmed that the Mortgage Guarantee Scheme, originally launched in 2021, will now be made permanent. This decision forms part of wider efforts to improve access to home ownership for individuals with smaller deposits.
Quick summary (TLDR)
- 95% loan-to-value mortgages to remain available permanently
- The scheme supports first-time buyers and home movers
- Applies to properties valued up to £600,000
- Lenders remain liable for a portion of any losses
- Government caps its guarantee liability at £3.2bn
Key details of the UK mortgage guarantee scheme
The Mortgage Guarantee Scheme aims to encourage lenders to offer 91% to 95% loan-to-value (LTV) mortgages by offering them a partial government guarantee.
It applies to:
- First-time buyers
- Home movers
- Properties worth up to £600,000
The guarantee is valid for up to seven years after the loan is issued.
Lenders remain responsible for the full loan and pay a commercial fee to participate. The government guarantee covers a portion of any losses, with a total liability cap of £3.2 billion.
More than 53,000 mortgages have already been completed under the scheme since 2021, totalling over £10.7 billion.
Other information at a glance
Here is a summary of the key facts.
Income multiples
- The scheme does not cap income multiples directly
- Most lenders typically offer up to 4.5x annual income
- Some cases (e.g. higher earners or joint applications) may be eligible for up to 5x or 5.5x income
- A few lenders, depending on internal criteria and loan size, may offer up to 6x income
- But this is rare and usually restricted to specific products or professional mortgages
Income thresholds
- Again, there is no government-set minimum or maximum income
- However, individual lenders may apply their own thresholds
Some lenders may only offer higher income multiples to applicants with higher disposable income or lower debt ratios
If you are a first-time buyer and are looking to get on the ladder, our independent mortgage advisers are on hand to help.
Lender participation in the mortgage guarantee scheme
Several high street banks are expected to continue offering 95% mortgages under the scheme. These loans can now be issued with the backing of a long-term guarantee, which some industry voices suggest may increase lender confidence.
Recent changes in affordability rules may also support access to low-deposit mortgages:
- Some lenders are offering loans up to 4.5x income or higher
- Nationwide has recently reduced its minimum income threshold for certain deals
- Brokers report increased interest in 5% deposit options
Commenting on the government’s announcement, Akwasi Duodu, Managing Director of Sterling & Law, offered this reflection:
“Any initiative that broadens access to home ownership tends to draw strong public interest. Buyers and lenders alike may take reassurance from the scheme’s permanence, but it’s important to weigh this alongside overall market conditions.”
Summary
The Mortgage Guarantee Scheme is designed to support access to home ownership by encouraging lenders to offer mortgages to buyers with a 5% deposit.
Now made permanent, the scheme provides a partial government guarantee on 91–95% loan-to-value mortgages for first-time buyers and home movers purchasing properties worth up to £600,000.
The government does not offer loans or reduce borrower liability. Instead, the scheme gives participating lenders a degree of protection against loss if a borrower defaults in the early years of the mortgage.
The availability of 95% mortgages remains influenced by each lender’s appetite for risk, internal policy, and wider economic conditions. While the permanence of the scheme may improve confidence, it does not override standard lending practices.
Factors to consider
- Borrowers are still subject to full affordability and credit checks
- The guarantee protects lenders, not borrowers
- Not all lenders participate in the scheme
- Mortgage rates for low-deposit deals may be higher
- Other schemes like Shared Ownership or First Homes may still apply
FAQs
Who is eligible for the Mortgage Guarantee Scheme?
The scheme is open to first-time buyers and home movers purchasing a main residence in the UK, with a value of up to £600,000, using a 5% deposit.
Does the government guarantee to reduce my risk as a borrower?
No. The guarantee protects the lender. Borrowers are still fully responsible for their mortgage payments and must pass standard affordability checks.
How long is the government’s guarantee valid?
The guarantee lasts up to seven years from the start of the mortgage. This term is designed to cover the typical period where any losses are most likely to occur.
Are mortgage rates under this scheme cheaper?
Not necessarily. Mortgage rates for 95% LTV loans may be higher than for lower LTV deals, even under the scheme. Rates vary by lender and applicant circumstances.
Can I use this scheme to buy any type of property?
The scheme applies to residential properties under £600,000. It does not cover second homes, buy-to-let, or non-standard construction types.
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