What is the 95% Mortgage Guarantee Scheme?

Announced earlier this year by Chancellor Rishi Sunak in the Spring Budget, the Mortgage Guarantee Scheme officially launched on 19th April 2021 as a way to help both first time buyers and current homeowners afford to move home, without requiring they have large deposits.

What is the Mortgage Guarantee Scheme?

Backed by the UK Government, the Mortgage Guarantee Scheme will ensure there are 95% LTV mortgage options, allowing home buyers to purchase property up to the value of £600,000 with just a 5% deposit.

Why is it necessary?

Figures show that the demand for home ownership soared during lockdown, with nearly 80% of private renters who were asked, actively saving for a deposit to purchase their own home. The number of mortgage approvals for house purchases in January 2021 saw a 40% increase than the same month in the previous year.

But with lenders tightening eligibility criteria for mortgage applications in response to economic consequences caused by the COVID-19 pandemic, many low-deposit mortgage options disappeared from the market, causing the UK government to step in and provide a helping hand to those looking to buy a property but who, for whatever reason, are unable to raise a significant deposit.

How does the Mortgage Guarantee Scheme work?

The government will offer lenders the guarantee that they need in order to provide those looking to buy a home up to the value of £600,000 with 95% (LTV) mortgages subject to the usual affordability checks associated with mortgage applications.

These mortgage options are being widely offered by high street lenders, including:

  • Lloyds
  • Santander
  • Barclays
  • HSBC
  • Natwest

And Virgin Money will be joining in May 2021.

Chancellor Rishi Sunak had this to say about the scheme:

“Every new homeowner and mover supports jobs right across the housing sector, but saving for a big enough deposit can be hard, especially for first time buyers.

“By giving lenders the option of a government guarantee on 95% mortgages, many more products will become available, boosting the sector, creating new jobs and helping people achieve their dream of owning their own home.”

If you’re thinking of buying a home and are looking for mortgage advice, get in touch with our mortgage advisors, David Treharne and James Boland.


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