Mortgage guarantee scheme: what is it, and who can apply?

Find out how you can benefit from the government mortgage guarantee scheme that helps more people get on the housing ladder with a smaller deposit. 

Summary

• The mortgage guarantee scheme helps first homebuyers get on the property ladder.
• Mortgages of up to 95% are available for those meeting the criteria.
• The UK government has extended this scheme until June 2025 to assist more first-time home buyers.
• There are alternatives to the mortgage guarantee scheme that also offer enhanced opportunities for buyers.

What is the mortgage guarantee scheme?

The mortgage guarantee scheme is a UK government-run scheme that offers UK citizens the option to apply for a mortgage with just a 5% deposit.

The scheme was first introduced in April 2021 as a way to make buying a house more affordable.

It was originally intended to end in December 2023, but the Autumn Statement announced an extension so it’ll run until the end of June 2025, allowing more people to take advantage of the scheme.

Who can apply for the mortgage guarantee scheme?

Not everyone is eligible to apply for the mortgage guarantee scheme.

There is a set list of criteria each applicant must meet in order to apply,

You need to be:

• A first-time home buyer 
• Applying for a single or joint mortgage 
• Apply for a repayment mortgage 
• Have access to 5%-9.99% of the total deposit 

You cannot apply for the mortgage guarantee scheme if you buy a new-build property or second home, apply for a commercial mortgage, or apply for an interest-only mortgage. 

However, if you are eligible for the mortgage guarantee scheme, there are several big lenders that you can use, including Lloyds, Barclays, HSBC, and Halifax.

How to apply for the mortgage guarantee scheme

If you meet the above criteria, you can begin the application process for a mortgage guarantee scheme.

Follow these simple steps:

1. Pass standard affordability checks 

Before your application can be accepted, the lender will want to check your credit score and repayment history. If you pass, you can proceed to the next step.

2. Select a mortgage that is 91%-95% of the value of the property you’re applying for 

You need to ensure you’re eligible for the mortgage guarantee scheme. If the mortgage is for between 91%-95% of the value of the home you intend to buy, you should be eligible.

3. Use a mortgage calculator 

It is helpful to use a mortgage calculator to determine the property you can afford if you’re planning to get a mortgage with a 91-95% loan to value (LTV),

4. Apply at your chosen bank or via a broker

Once you have all your documents and information ready, you can approach a lender that offers this type of loan to officially put forward an application. 

Alternatively, you could talk to a broker who may be able to help you with your application.

The pros and cons of the mortgage guarantee scheme

Like all types of loans, there are pros and cons to the government mortgage guarantee scheme.

Pros

• Increased opportunities for first-time home buyers to get on the property ladder.
• A minimum of just 5% is needed as a deposit to buy your own home.

Cons

• You may face higher interest rates of up to 7% due to the smaller size of your deposit.
• Because of the size of your mortgage, you may struggle to remortgage when your initial fixed-rate deal ends.

Are there any alternatives to the mortgage guarantee scheme?

Yes, if you can’t or don’t want to apply for the mortgage guarantee scheme, there are other options to explore.

You can look into the shared ownership scheme or consider a guarantor mortgage, although, with the latter, the guarantor will be responsible for paying the mortgage if you can’t. 

Want to learn more about mortgages?

The UK government mortgage guarantee scheme has made it more affordable to initially buy a home and allows more people to get on the property ladder.

There are criteria that need to be met to obtain a mortgage of up to 95%, and buyers must ensure that they are aware of the pros and cons beforehand. 

If you want to learn more about mortgages, let Unbiased match you with a mortgage broker who can offer expert financial advice.