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New Mortgage Guarantee Scheme to launch in April 2021

The government launched the new Mortgage Guarantee scheme in the Budget 2021 to help buyers with a 5% deposit buy a home. Learn how the 95% mortgage guarantee will work and how to apply.





New mortgage guarantee: the basics

  • From April, 2021, the scheme allows you to get a mortgage with just a 5% deposit. The 95% mortgage scheme will run for 18 months until December 2022.

  • 95% mortgages virtually disappeared when the pandemic started. Now that the government will offer lenders a guarantee, this will encourage them to lend again.

  • The scheme applies to all types of properties (new build and old) that cost less than £600,000.

  • First time buyers AND existing homeowners can apply.

  • You will be able to fix your initial rate for 5 years if you wish to.

  • You must have a regular income, a good credit rating and show that you can afford the monthly mortgage repayments.

How do I apply for the mortgage guarantee?

  • Once you have found a property you want to buy, to access the mortgage guarantee, you need to find a mortgage from one of the participating lenders. A good mortgage broker can walk you through your options and find the best deal for you.

Will all mortgage lenders offer 95% mortgages?

  • Big name lenders Lloyds, Natwest, Santander, Barclays and HSBC will be offering rates for those with as little as a 5% deposit and Virgin Money a little bit later. Although rates will still be higher than for those with bigger deposits, the wider choice has helped improve the options.

Is the mortgage guarantee the best way to get a mortgage?

  • Not necessarily. The guarantee will help to boost the number of 95% mortgages as they have virtually disappeared from the market when the pandemic hit. It makes no real difference to you as a borrower whether a deal is backed by the government’s mortgage guarantee or not, so the mortgage interest rate, terms and any mortgage fees will be your guide as to the best deal with the deposit you have. It is worth noting, that if you can push to a 10% deposit rates are considerably cheaper and there are more products on the market.


How long will the mortgage guarantee scheme run for?

  • The plan is for the scheme to run for 18 months, from April 2021 until December 2022.

  • But you will want to watch things closely if you are interested. Supply of housing is severely limited in some parts of the country and this increased demand could push up house prices making it even harder for you to get on the housing ladder.