In a move welcomed by developers and brokers alike, the UK government has extended the Mortgage Guarantee Scheme through 2025, offering support to buyers with 5% deposits and helping maintain transactional momentum.
This article looks at how the scheme works, who benefits most, and what it means for the wider market.
How the Scheme Works
- The government guarantees a portion of the lender’s risk on mortgages between 91%–95% LTV.
- Applies to homes up to £600,000, both new-build and resale.
- Only available for owner-occupiers (not investors or second homes).
The aim is to reduce the risk premium for high-LTV lending and improve availability of 5% deposit mortgage products.
Why It Matters in 2025
- First-time buyer activity remains below pre-2020 levels due to affordability gaps.
- Rising rents have made saving for a deposit harder for many would-be buyers.
- 5% deposit options help bridge the gap without relying on family or private schemes.
Lenders like NatWest, Halifax, and Barclays have continued to support the scheme, keeping rates competitive and turnaround times short.
Market Impact
| Impact Area | 2025 Observation |
|---|---|
| FTB enquiries | +12% YoY in Q1 |
| Mortgage approvals | Stronger in 91–95% LTV band |
| New-build uptake | Boosted by builder and lender support |
Developers are increasingly pairing the scheme with tailored incentives and upgrades, especially on sub-£400k units.
Limitations to Note
- Monthly repayments remain high due to rate levels, even with low deposit.
- Doesn’t address supply-side issues—availability of suitable stock is still a barrier.
- Income-to-loan ratios still apply, limiting reach in high-cost cities.
Final Thoughts
The Mortgage Guarantee Scheme is not a silver bullet—but it’s a valuable lever in maintaining access for first-time buyers in a high-cost environment.
As affordability continues to stretch, targeted support like this remains a vital policy tool. Investors and developers alike should be aware of its influence on demand timing, unit mix, and pricing strategy.