UK Mortgage Guarantee Scheme: 5% Deposit, 95% LTV, £600,000 Property Cap (2025 Permanent Scheme)

What the scheme is

A new permanent mortgage guarantee scheme was launched in July 2025 to replace the previous, temporary mortgage guarantee scheme which closed in June 2025 (HomeOwners Alliance).

The new scheme is permanently available from July 2025 (gov.uk). It sustains availability of 91-95% loan-to-value mortgages by providing participating lenders with a government-backed guarantee (gov.uk).

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Who can use it and how much deposit is needed

Mortgages offered through the scheme will enable eligible first-time buyers and home movers to buy a home with a deposit as small as 5% (gov.uk).

The required loan-to-value sits between 91% and 95% (HomeOwners Alliance). On a £200,000 property, the deposit would need to be between £10,000 (5%) and £18,000 (9%) (HomeOwners Alliance).

The scheme is available throughout the United Kingdom (gov.uk).

The £600,000 property price cap

Under the original mortgage guarantee scheme, properties had to be worth £600,000 or less (HomeOwners Alliance). A property above the £600,000 cap therefore falls outside the scheme regardless of the borrower's other circumstances (HomeOwners Alliance).

What the scheme can't be used for

Some property and product types are excluded outright. The scheme cannot be used to invest in a Buy to Let or to buy a second home (HomeOwners Alliance). Offset mortgages and guarantor mortgages are also not available under the scheme (HomeOwners Alliance).

Borrowers must apply for a repayment mortgage; interest-only mortgages are not allowed under the scheme (HomeOwners Alliance).

Participating lenders

Major mortgage lenders taking part in the mortgage guarantee scheme include Barclays, Lloyds, and Halifax (HomeOwners Alliance). The borrower applies for a 91-95% LTV mortgage with a participating lender, and the lender accesses the government-backed guarantee (gov.uk).

What a 5% deposit costs each month

The scheme requires a repayment mortgage (HomeOwners Alliance), so the monthly cost follows the standard repayment formula:

M = P × [r(1 + r)ⁿ] ÷ [(1 + r)ⁿ − 1]

where P is the loan, r is the monthly interest rate, and n is the number of monthly payments. Best-buy 95% LTV rates stood at 4.57% for a 2-year fix and 4.53% for a 5-year fix in December 2025 (HomeOwners Alliance). Running the 4.53% 5-year fix over a 25-year term (n = 300, r = 4.53% ÷ 12 = 0.3775% a month) at three property prices:

£200,000 property — the price used in the deposit example above. A 5% deposit is £10,000, leaving a £190,000 loan. M = £190,000 × [0.003775 × (1.003775)³⁰⁰] ÷ [(1.003775)³⁰⁰ − 1] = £1,059.32 a month.

£272,000 property — the UK average price (ONS, September 2025). A 5% deposit is £13,600, leaving a £258,400 loan: £1,440.67 a month.

£600,000 property — the scheme's price cap. A 5% deposit is £30,000, leaving a £570,000 loan: £3,177.96 a month, or £38,135 a year before any other housing cost. The cap defines the largest loan the scheme can guarantee: £570,000 at 95% LTV.

Each figure assumes the rate holds for the full term, which no fix does — after the fixed period the loan reprices, so the numbers describe the fixed window, not the whole 25 years.

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The same house with a 10% deposit

The 95% tier carries a higher rate as well as a bigger loan. In the same December 2025 best-buy data, a 90% LTV 5-year fix was 4.16% against 4.53% at 95% LTV (HomeOwners Alliance). On the £272,000 average-priced property (ONS, September 2025):

• 10% deposit: £27,200 down, £244,800 borrowed at 4.16% over 25 years = £1,313.87 a month.
• 5% deposit: £13,600 down, £258,400 borrowed at 4.53% over 25 years = £1,440.67 a month.

The 5% route costs £126.80 more each month — roughly £7,608 across a five-year fixed period — in exchange for needing £13,600 less deposit on day one. Both effects pull the same way: the smaller deposit means more is borrowed and the rate on what is borrowed is higher. The mortgage calculator accepts any deposit, price and rate combination, so the same comparison can be run at the reader's own numbers.

A note on scope

This page covers the published rules of the new Mortgage Guarantee Scheme: the 5% minimum deposit (gov.uk), the 91-95% LTV range (gov.uk), the £600,000 property price cap (HomeOwners Alliance), the Buy-to-Let and second-home exclusions (HomeOwners Alliance), the repayment-mortgage requirement (HomeOwners Alliance), and the participating-lender list (HomeOwners Alliance).

Eligibility for a 91-95% LTV mortgage under the scheme rests with the participating lender (gov.uk).

Frequently asked questions

What is the smallest deposit the scheme allows?

A deposit as small as 5% (gov.uk). On a £200,000 property that is £10,000 (HomeOwners Alliance).

Is it open to home movers as well as first-time buyers?

Yes — the scheme is open to eligible first-time buyers and home movers (gov.uk).

Can the scheme be used for a Buy-to-Let?

No. The scheme cannot be used to invest in a Buy to Let or to buy a second home (HomeOwners Alliance).

What is the property price cap?

Under the original mortgage guarantee scheme, properties had to be worth £600,000 or less (HomeOwners Alliance).

Which lenders participate?

Major lenders taking part include Barclays, Lloyds, and Halifax (HomeOwners Alliance).

Can I use it for an interest-only mortgage?

No. Borrowers must apply for a repayment mortgage; interest-only mortgages are not allowed under the scheme (HomeOwners Alliance).

When did the new scheme start?

A new permanent mortgage guarantee scheme was launched in July 2025 to replace the previous, temporary mortgage guarantee scheme which closed in June 2025 (HomeOwners Alliance).