Following a tough few years for buyers with minimal deposits, the UK Government’s mortgage guarantee scheme saw a comeback for mortgage products with only 5% up front. Read on to find out if this government-backed scheme can help you.
FAQs
What is a mortgage guarantee scheme?
A mortgage guarantee scheme is an agreement that the government will compensate mortgage lenders for a portion of their net losses if your home is subject to repossession. This means that if you can’t pay your mortgage, your mortgage provider doesn’t lose out. The aim of the programme is to reduce the risk to mortgage lenders of offering 95% mortgages, and to subsequently increase the supply of these products for buyers who don’t have significant savings.
Who is eligible for the mortgage guarantee scheme?
The current mortgage guarantee scheme is open to both first-time buyers and existing homeowners. To qualify, you must be able to prove you are capable of making the mortgage repayments. This means you have to show proof of a stable income and a good credit rating.
Is the mortgage guarantee scheme only for new builds?
The latest mortgage guarantee scheme applies to both new builds and older properties. As long as the value of the property you want to buy is below £600,000, it is eligible for the scheme.
While most schemes focus on new homes, this one is designed to help anyone get onto the property ladder, whatever kind of home they want to buy.
Why was the new mortgage guarantee scheme introduced?
The government introduced the new mortgage guarantee scheme because the pandemic significantly reduced the availability of 5% deposit mortgages. Most lenders became much more cautious in their lending, meaning that buyers who couldn’t raise a large deposit couldn’t secure mortgages.
The scheme’s designers want to encourage mortgage providers to start lending at the minimum deposit level again.
How long will the mortgage guarantee scheme last?
The mortgage guarantee scheme will remain open until December 2023. If you secure a mortgage under this scheme, the government will guarantee your mortgage for up to 7 years after the agreement is signed.
Which banks offer the mortgage guarantee scheme?
At the time of writing, eight major banks offer 95% LTV mortgages under the government’s mortgage guarantee scheme. They are:
- Lloyds
- NatWest
- Santander
- Barclays
- HSBC
- Virgin Money
- Halifax
- Bank of Scotland
How do I apply for the mortgage guarantee?
You can apply for the government-backed mortgage guarantee scheme in the same way you would a normal mortgage. You can either apply directly through any participating lender, or contact a mortgage broker to find the best available deals on your behalf.
Is the new mortgage guarantee scheme worth it?
Getting a mortgage under the new guarantee scheme will not make any difference to the money of money you pay for your product. However, if you already planned to buy a property with a 5-9% deposit, then you will currently be able to enjoy a greater variety of mortgage products thanks to the scheme. It has opened up the 5% deposit mortgage market again, so you will find it significantly easier to secure a mortgage at this deposit level.
However, be aware that the bigger the deposit you can raise, the better the mortgage deals will be. If you can stretch to a 10% deposit, you’ll be able to access mortgages with lower interest rates.
Will the mortgage guarantee scheme be extended? (March 2023 Update)
In December 2022, the government announced an extension to the mortgage guarantee scheme. Originally slated to end in December 2022, the extension keeps the scheme going until 31st December 2023.
Are 95% mortgages ending?
It is impossible to say whether 95% mortgages will stop being available after December 2023. However, if the government does not extend the mortgage guarantee scheme, lenders will be far less likely to keep offering this kind of mortgage product.
If you want a more in-depth guide to getting a mortgage, check out the article linked below. Similarly, if you need to know more about loan-to-value, help-to-buy or other home purchasing schemes, our dedicated guides can help.
HomeViews provides verified resident reviews of the UK’s housing developments. We’re working with developers, house builders, operators, housing associations and the Government to recognise high performers and help improve standards in the built environment.
