5 min read
The UK government has launched a new permanent Mortgage Guarantee Scheme in July 2025. Here's everything you need to know about how it works, who it benefits, and what risks to consider.
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Dubbed "Freedom to Buy," the new Mortgage Guarantee Scheme is designed to make it easier for buyers with small deposits to access the housing market.
If you’re a first-time buyer or home mover with a small deposit, now is the time to explore your mortgage options and speak with an adviser or lender about your eligibility under the scheme.
In this article
The Mortgage Guarantee Scheme is a government-backed initiative that will help first-time buyers and home movers buy a house with a deposit of just 5%.
The scheme encourages lenders to offer more 91–95% loan-to-value (LTV) mortgages by providing a partial government guarantee, reducing their risk if borrowers can’t keep up with repayments. As a result, it’s easier for buyers with a 5–9% deposit to get a mortgage.
Unlike previous versions of the scheme, the one implemented in July 2025 is permanent. It aims to provide long-term stability for buyers and lenders alike.
This permanent scheme is open to:
First-time buyers
Home movers
UK residents buying properties valued up to £600,000
It will not apply to:
Buy-to-let investors
Second homes
New-build properties (in some cases)
With this being said, specific eligibility criteria may vary slightly between lenders, so be sure to check.
For home buyers, the mortgage process under this scheme is largely similar to a standard mortgage, as the changes mainly affect lenders. However, you should be aware of the following:
Within this scheme buyers can purchase a home with a 5–9% deposit
Lenders receive a government guarantee on part of the mortgage (up to 15%)
The guarantee lasts up to 7 years from the start of the mortgage
The maximum mortgage value is £600,000
Read to learn how to apply for a mortgage.
Lower deposits: you will be able to access the housing ladder with as little as 5% deposit.
Increased lender confidence: as more lenders are likely to offer high LTV mortgages, there will be more products to choose from.
Stability: the permanent nature of the scheme allows buyers to plan long term.
Higher interest rates: high LTV mortgages often come with higher interest rates.
Negative equity risk: Small deposits mean less cushion if house prices fall.
Affordability checks still apply: Lenders will still assess income and credit risk.
Find our top tips to help you save for a deposit.
Home buyers do not apply for the scheme directly and therefore the process is the same as getting any mortgage:
Research lenders - as it’s a new scheme not all lenders will participate, however many high street banks are expected to join
Get an Agreement in Principle (AIP) from a participating lender
Submit a full mortgage application through the lender or an adviser.
No, it’s not likely to lower house prices, it will just make houses more affordable.
This depends on the individual lender, so check their criteria before applying. New-build homes may offer similar incentives, so it’s also worth speaking to developers to see what’s available.
Not directly. The government provides a partial guarantee to the lender, not to you as the buyer. It doesn’t affect your mortgage terms and you remain responsible for repayments.
More information about the 2025 Mortgage Guarantee Scheme can be found on the gov.uk website.
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