What the 2025 mortgage guarantee scheme could mean for you
Rachel Reeves recently announced a permanent mortgage guarantee scheme which, in the words of the government website, “aims to incentivise and sustain availability of 91-95% loan-to-value mortgages”. But you might be wondering how it’s different from previous schemes, and if it’s relevant to you as a buyer. In this month’s article, we look at the new scheme and whether it could help or hinder your next move.
What is the 2025 mortgage guarantee scheme?
In a bid to stimulate an annual increase of 36,000 mortgages for first-time buyers, the government has recently introduced a number of fiscal changes. The “new” mortgage guarantee scheme (also referred to as Freedom to Buy) provides a government guarantee to lenders who offer a 95% LTV mortgage, covering part of their losses should borrowers default on their mortgage1.
As we discussed in one of our recent first-time-buyer articles, low-deposit mortgages are already available to borrowers, but they are riskier for lenders, so tend to be less common with pricier monthly repayments. By shifting some of the risk from the lender to the treasury, the government hopes to see more low-deposit mortgages available for buyers.
What’s different about this mortgage guarantee scheme?
This latest scheme is a permanent extension to the government guarantees introduced in April 2021 and which ended on the 30th June 2025. It’s not new per se; the mechanics are largely the same, and it has the same aims, but there are some notable differences:
- This scheme is now open to home movers as well as first-time buyers
- Eligible property prices are capped at £600,000
- It now covers remortgages of the applicants’ main property
Probably the most crucial difference is that this new scheme promises longevity. By charging lenders a fee to participate and by capping government liability, the hope is that it will encourage responsible lending and offer reliable, long-term access to low-deposit mortgages.
Why should you care about the 2025 mortgage guarantee scheme?
If you are planning your next move, then the introduction of this more permanent guarantee scheme could mean that a broader range of low-deposit mortgages become available to you.
Four specific types of buyers might find the scheme beneficial:
- First-time buyers with low deposits
- Home movers with limited equity in their current property
- Borrowers without guarantors or family support
- Buyers in areas with high property prices
It is worth noting here that although the scheme shifts some risk away from the lender, it doesn’t mean that their credit standards will be relaxed. If you have considerable credit issues or affordability concerns, then the 2025 mortgage guarantee scheme is unlikely to be of any benefit.
As with any government scheme, I would always recommend speaking to your mortgage broker, who will be able to talk you through the benefits and risks relative to your unique circumstances.
Could the 2025 mortgage guarantee scheme be a red herring?
As with any government home-buying scheme, I advise my clients to be aware of them, to research them, but not to expect too much of them. They are rarely a panacea for all your mortgage challenges, and can often be more expensive than similar alternatives already available on the market.
In this instance, 95% LTV mortgages do exist outside of the mortgage guarantee scheme, which you may already qualify for.
It remains to be seen whether this new government initiative makes the low-deposit mortgage market more competitive or if the fees that are applied to participating lenders make their way to borrowers.
When it comes to navigating new fiscal announcements like this, it’s essential to speak to a mortgage broker who can cut through the government rhetoric and look directly at your individual circumstances.
How can Downton Mortgages & Financial Services help?
I set up Downton Mortgages & Financial Services to give people confidence in their financial decisions. We do that by making your options clear and easy to understand. There are no silly questions, and we are on hand to help every step of the way from research through to application.
For more information about our services look at our website here or alternatively, get in touch for a no-obligation chat about your circumstances and house-buying plans.
Sources
1 The 2025 Mortgage Guarantee Scheme – Guidance
Other blogs we’ve written on related topics
5 Essential Questions for first-time buyers
First-time buyers – building up your savings
Can I get a first-time mortgage if I have bad credit?
Important Information
The information contained within was correct at the time of publication but is subject to change (August 2025).
Please note for all mortgage products, terms and conditions apply. This information is a summary only. You will receive full documentation upon application which sets out the terms, conditions, and limitations of lending provided.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.