Mortgage Guarantee Scheme

The Mortgage Guarantee Scheme was created to help buyers with small deposits, secure homeownership through 95% loan to value mortgage products.

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What is the mortgage guarantee scheme?

The mortgage guarantee scheme is a UK Government initiative designed to increase the availability of 95% loan-to-value mortgage products, enabling more households with smaller deposits (usually 5%) to access mortgages.

The government provides lenders an option to buy a guarantee on part of the mortgage, in effect compensating the latter for any losses suffered in the event of repossession.

It applies down to 80% of the purchase value of the guaranteed property in question, and the lender takes a small risk for the remaining part.
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Things to consider

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What are the benefits?

The mortgage guarantee scheme can help first-time buyers because it allows them to buy a home with a 5% deposit. Current homeowners can also use the scheme, permitting them to move more easily.
In a wider context, the scheme has restored some competition and consumer choice to the market after a sharp reduction in the availability of high loan-to-value (LTV) mortgage products, particularly during the coronavirus pandemic.

What are the risks?

While there is no fee to join the mortgage guarantee scheme, it’s important to keep in mind that the interest rates attached to low-deposit mortgages tend to be higher. You must consider whether you’ll be able to make the monthly repayments.
While the Government present lenders the option to buy a guarantee on mortgages through this scheme, borrowers are still responsible for repayments like they are for regular mortgage products. To ensure that you’re eligible to use the mortgage guarantee scheme, you’ll be expected to meet a lender’s normal mortgage affordability criteria.
While you may be in a position to make payments under the mortgage guarantee scheme initially, it’s understandable that your circumstances can change over time. If you find yourself in this position, it’s essential to speak with your lender and identify any issues that you’re having. There are also many outlets for independent advice where you can go to get personalised information that fits your circumstances.

You will not receive special treatment from a lender if it’s part of the mortgage guarantee scheme. If the
lender feels it has no other option than to repossess a property, you’ll still be in charge of repaying the
difference between the amount you owe to the lender and the sum recovered once the property is sold.

Make sure to keep informed, seek advice, and be aware of your obligations in case of property
repossession by arranging a consultation with UKMC today.

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Frequently asked questions

The scheme was scheduled to end on December 31 2023 but the deadline has since been extended to June 30 2025.
A lender can share personal information with the scheme’s administrator, who acts on behalf of the Government. However, this process is strictly controlled and limited to specific purposes. The information exchange guarantees that your mortgage remains eligible for the guarantee scheme. It also permits periodic assessment of your mortgage status and the potential government exposure under the guarantee.
Your information is handled sensitively, and the Government uses it for specific purposes related to the mortgage guarantee scheme.

HOW TO APPLY FOR the Mortgage Guarantee Scheme

01

Affordability checks

Make sure you meet the scheme’s eligibility criteria. Before your application can be accepted, the lender will check your credit score and repayment history.

02

Select a mortgage

Choose a mortgage that is 91% to 95% of the value of the property you’re applying for. Check it’s a repayment mortgage (and not interest-only).

03

Use a mortgage calculator

You’ll need to calculate your affordability before you purchase any property. You’ll then be able to secure your agreement in principle and find your dream home. 

04

Contact an advisor

If you’re considering using the mortgage guarantee scheme, it’s important to reach out to expert financial advisors to help you make an informed decision.

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