New Mortgage Guarantee Scheme Unveiled by Government

The UK government has announced key details of its new mortgage guarantee scheme, scheduled to launch in July. This initiative will allow qualifying first-time buyers and home movers to purchase a property with a deposit as low as 5%. Eligibility criteria have not yet been finalised. Designed as a permanent scheme, its goal is to maintain the availability of 91–95% loan-to-value mortgages across different phases of the economic cycle. Under this initiative, lenders will receive a government-backed guarantee that insures a portion of potential losses on high loan-to-value mortgages. Each guarantee will remain valid for up to seven years from the start of the mortgage. Participating lenders will pay HM Treasury a fee per mortgage, which will be set and periodically reviewed to ensure the scheme is financially sustainable through revenue collected from those fees.

To manage financial risk, the scheme includes a £3.2 billion cap on the size of the contingent liability. HM Treasury has approved the initiative in principle.

Economic Secretary to the Treasury, Emma Reynolds, commented on the launch: “Supporting first-time buyers is at the heart of this government’s housing strategy as we aim to build 1.5 million new homes this Parliament. The government recognise the difficulties that many aspiring homeowners face in getting on the housing ladder—in particular, the challenge of raising a sufficient deposit for a home. To tackle this problem head on, we committed to introduce a permanent mortgage guarantee scheme in our election manifesto to ensure buyers with smaller deposits can get a mortgage and fulfil their home ownership ambitions.”

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Source: Juliet Shaw, Today's Conveyancer

23 June 2025

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