UK Government announce new 2025 Mortgage Guarantee Scheme

The new Mortgage Guarantee scheme, also known as the Freedom to Buy Mortgage Scheme, will be permanently available starting July 2025. This new scheme's launch comes after the previous scheme ended in June of this year.

Figures from the scheme in its earlier form showed that between its start in April 2021 and December 2024, 53,261 mortgages had been completed with the support of the scheme. This represents 1.4% of all residential mortgage completions during this period.

How does the scheme work?

The new Mortgage Guarantee Scheme allows participating lenders to offer mortgages with more than 91% loan-to-value (LTV) and up to as much as 95%.

This means that borrowers will only need to contribute a deposit of between 5-10% when buying a home, making it far more affordable.

This is all made possible with backing from the government who provides a guarantee to lenders. The government agree to cover a percentage of the lender's losses if a borrower defaults on their mortgage and the property is sold for less than the outstanding loan.

This guarantee reduces the risk for the lender and allows them to offer these mortgages, and for buyers it means they have greater access to mortgages with a smaller deposit.

The pros and cons

The Mortgage Guarantee Scheme is intended to increase mortgage offerings for people with low-deposits and first-time-buyers, who are currently struggling to get on the property ladder.

There are a number of benefits to this scheme. In particular a 91-95% mortgage can help aspiring homeowners get on the property ladder and escape rising rental fees which are making it difficult to save.

However, the scheme isn't perfect, and prospective borrowers still need to be just as cautious when applying for these mortgage as they would with any other kind.

This new scheme is designed to increase availability of mortgages by offering more protection for lenders, so borrowers still need to be considerate of the long-term costs and risks.

Multiple UK lenders have agreed to take part in the scheme but there are still far fewer options for borrowers than there are for other mortgage types.

Borrowers also should be keeping an eye out for mortgage rates and lending charges, which aren't likely to be as competitive as they would be for lower LTV mortgages.

To help you calculate the potential long-term costs of taking out a mortgage, with have a number of mortgage calculators you can use to work out how much you can borrow, how much your repayments are likely to be, and how changes to the Bank of England base rate might affect your repayments.

Who is eligible for a 95% mortgage?

The scheme is aimed at first-time buyers but it's not restricted to them. Anyone with a low deposit can apply for one of these mortgages, but there are some eligibility criteria that you will need to meet, which includes the following:

• Only repayment mortgages can be applied for: Borrows cannot apply for interest-only mortgages

• Available only for residential properties: You cannot take out a 95% mortgage if you are purchasing a property with the intention of letting it or if you are buying a second property. At least one of the homeowners needs to be living in the property on a permanent basis and the property needs to be residential.

• Property value is limited: You need to realistically be able to repay the loan, so value of the property you purchase is limited.

• You need to pass the usual affordability criteria: Your lender will carry out the same checks as usual, which means they'll look at your credit score, income and outgoings etc.

If you think a high LTV mortgage is right for you, you can compare 95% mortgage rates with MoneySuperMarket to find the best deal, or check out our mortgage guides to find out more about your options.