What the Mortgage Guarantee Scheme Means for First-Time Buyers

Freedom to Buy is the government’s permanent mortgage guarantee scheme, launched in July 2025. It replaced the previous temporary scheme, which had been running since 2021 and ended in June 2025.

The scheme exists because many lenders are reluctant to offer mortgages where the buyer has only a 5% deposit. The risk of the loan outweighing the property’s value, particularly if prices fall, makes lenders cautious.

Freedom to Buy addresses this by offering a government-backed guarantee on part of the loan, which reduces the lender’s risk and encourages them to offer 95% mortgages more readily.

The scheme is open to both first-time buyers and home movers. The property must cost £600,000 or less and must be your only home. You must take out a repayment mortgage, not an interest-only one.

You do not apply to the scheme directly. You simply apply for a 95% mortgage with a participating lender. The guarantee operates in the background.

Not necessarily. Lenders offering 95% mortgages under the scheme are not obligated to price them below what the market would otherwise offer.

You are still borrowing a high proportion of the property’s value, which means you are in the higher-rate LTV bands regardless.

What the scheme does is make 95% mortgages more widely available. Without it, some lenders would simply not offer them.

More lenders offering 95% products means more competition, which is better for rates than a market where only a handful of lenders participate.

It depends on your circumstances. The advantages are clear: you can buy sooner without waiting years to save a larger deposit. The disadvantages are that you will pay a higher interest rate than buyers with larger deposits, and your equity cushion at the start is thin.

If house prices fall shortly after you buy, you could find yourself in negative equity.

For buyers with stable incomes buying in areas with steady house price growth, a 5% deposit mortgage can be a sensible route onto the ladder. For buyers in areas with more volatile prices, or those whose income is less certain, the risk is greater.

The scheme is not exclusive to 5% deposits. It applies to mortgages with a deposit of between 5% and 9% of the property value (91% to 95% LTV). If you have saved 10% or more, you will access better rates outside the scheme through standard mortgage products.

Use our Mortgage Calculator to see what your monthly payment would look like at different deposit sizes.

Sources: HM Treasury, MoneySuperMarket, Zoopla. Freedom to Buy launched July 2025. This article is for information only and does not constitute financial advice. Your home may be repossessed if you do not keep up repayments on a mortgage.