95% Mortgage Guarantee Government Scheme | What? When? Who? How?

Government’s Mortgage Guarantee Scheme Explained

Introduction

Welcome back to our channel and podcast, Let’s Talk Money and Mortgages.

Host: Gemma (WIS)

Guest: Ifthikar – trained accountant, mortgage broker with 10+ years of experience, and a founding director at WIS.

Today’s topic: The Government’s Mortgage Guarantee Scheme.

We’ll discuss:

• What the scheme is about
• Who can apply
• Restrictions
• Affordability
• Pros & Cons
• How WIS can help

Q&A

Q1. What is the scheme about?

Before the pandemic, banks used to offer 5% deposit mortgages.

During the pandemic, lenders increased deposit requirements to 10–15% due to risk.

The government has now reintroduced 5% deposit mortgages through the guarantee scheme.

This is a welcome change since:

• 10% deposits are harder to save
• 15% deposits are almost impossible for many buyers

Q2. Who can apply for the scheme?

• First-time buyers
• Home movers (people moving house)
• Previous homeowners
• Deposit required: 5–9%
• Over 10% deposit: normal bank products apply

Q3. Does it have to be a new build?

No.

Unlike Help to Buy (restricted to new builds), this scheme applies to both new builds and existing properties.

Advantage: new builds often carry a premium price, so this scheme makes older properties more accessible.

Q4. Who cannot apply?

• Buyers of second properties
• Buy-to-let investors
• Purchases through limited companies

Otherwise, open to most people across the whole UK (up to £600,000 purchase price).

Q5. Are there restrictions?

Maximum property value: £600,000 (not ideal for some central London buyers).

Time limit: Runs from April (scheme launch) until December next year (about 1.5 years).

Q6. How will affordability work?

Normal bank affordability rules apply.

General rule of thumb:

• Up to 4.5x annual income (e.g., £100,000 salary → £450,000 borrowing).
• No government equity top-up (unlike Help to Buy).

Banks may be slightly stricter (e.g., 4.25x income) as this is a higher-risk mortgage.

Good credit score is important – banks may apply stricter credit scoring for 5% deposit cases.

Q7. Which banks are participating?

Confirmed: Lloyds, NatWest, Barclays, HSBC, Santander

Also joining: Virgin Money

More banks expected to follow.

Q8. How does this differ from Help to Buy?

Help to Buy:

• 5% buyer deposit
• 20% government equity loan
• 75% bank mortgage
• Government owns 20% stake in the property

Mortgage Guarantee Scheme:

• 5% buyer deposit
• 95% bank mortgage
• Buyer owns 100% equity
• Government guarantees 15% to the bank (not to the buyer)

Q9. What are the cons?

• Higher interest rates (banks charge more due to higher risk).
• Increased competition → may push up property prices.
• Risk of negative equity if house prices fall.
• £600,000 limit restricts options in expensive areas.
• Affordability may be lower compared to Help to Buy (no 20% government top-up).

Q10. What are the pros?

• Only 5% deposit required – much easier for many buyers.
• Works well for people with good income but limited savings.
• Available for everyone: first-time buyers, movers, and previous homeowners.
• Not restricted to new builds.
• 100% property equity ownership – unlike Help to Buy where the government owns 20%.

Viewer Questions

Q: Do I need to pay back the government?

No.

The guarantee is only between the government and the bank.

Government covers 15% risk to protect the bank – buyers are not directly involved.

Q: Can I only buy a new build property?

No. You can buy new or existing properties.

Q: How easy will it be to remortgage?

Expected to be similar to a normal remortgage.

Unlike Help to Buy (where the 20% loan complicates remortgages), here you own 100% equity.

Q: How can WIS help me with the scheme?

Provide budget planning tools (e.g., expense spreadsheet to help save deposit).

End-to-end digital mortgage broker service (mortgage deals, solicitors, surveys).

Free advice and no broker fee.

Offer hand-holding support especially for first-time buyers.

WIS Top Tips

Stamp Duty Holiday:

Ends in June.

Scheme launches in April → Buyers can benefit from both if they act quickly.

Lifetime ISA (LISA):

Government adds 25% bonus to savings.

E.g., save £4,000 → receive £1,000 bonus → useful for 5% deposits.

Help to Buy ISA (for existing account holders):

Still valid if you already have one.

Don’t forget to use it.

Closing Notes

These tips may not apply to everyone – always seek professional mortgage advice.

Reminder: Your home may be repossessed if you do not keep up with mortgage repayments.