What is the Mortgage Guarantee Scheme?

At a glance

• The Government launched a permanent Mortgage Guarantee Scheme in July 2025 as a replacement for its temporary precursor
• The scheme encourages lenders to offer higher loan-to-value mortgages by providing a guarantee that the Government would cover some of the cost if a borrower defaulted
• The scheme is just one way first-time buyers and borrowers with less equity are being supported.

What is the mortgage guarantee scheme?

The Mortgage Guarantee Scheme is an initiative to increase the availability of higher loan-to-value (LTV) mortgage deals by offering lenders a guarantee that the Government will cover some of the costs if a borrower were to default.

A temporary precursor to the scheme was introduced in April 2021 in response to the COVID-19 pandemic which saw mortgage providers become increasingly risk-averse and reluctant to lend to those with smaller deposits. As a result, there were very few deals that could cater for up to 95% LTV.

While product availability in this corner of the mortgage market has since improved, first-time buyers continue to face many obstacles to joining the property ladder which justified the need for a longer-term solution. This led the Government to introduce a permanent Mortgage Guarantee Scheme in July 2025.

How does the mortgage guarantee scheme work?

Mortgages offered through the scheme are available to eligible borrowers with deposits as small as 5% and it simply means they should have sufficient access to deals which can finance up to 95% LTV.

The Government makes sure of this by taking responsibility for some of the costs incurred by a lender if a borrower was unable to meet repayments. While lenders have to pay HM Treasury a fee for each mortgage entered into the scheme, the aim is they feel reassured and incentivised to offer more higher LTV deals.

HM Treasury considers the Mortgage Guarantee Scheme to present a ‘low’ risk of suffering a loss but nonetheless has capped the Government’s contingent liability at £3.2 billion.

Who is eligible for the mortgage guarantee scheme?

To apply for a mortgage under the scheme, you must meet the following criteria:

• You must be taking out a mortgage to purchase your main residential property in the UK (as the scheme can’t be used to buy a second home, buy-to-let property or business premises)

• You can apply either jointly or as an individual but must have a deposit of between 5% and 9% (as this enables you to apply for a mortgage between 91% and 95% LTV; work out the LTV you need using our calculator)

• Interest-only deals aren’t included under the scheme, meaning you’ll need to apply for a repayment mortgage

• You must pass any affordability tests required by a lender, including a credit check. Be sure to check your credit score beforehand and, if it isn’t up to scratch, work on ways to improve your credit rating.

How do I apply for a mortgage under the scheme?

The process of applying for a mortgage under the Mortgage Guarantee Scheme is exactly the same as applying for any other type of deal. Start by searching for and comparing mortgages that can finance up to 95% LTV or consider speaking to a mortgage broker for help finding the best deal for your needs.

After finding a mortgage, you’ll need to fill out an application form and make sure you meet both the scheme’s criteria and your lender’s affordability checks.