Mortgage Guarantee Scheme UK 2026: How the Permanent Scheme Works and Who Qualifies

The Mortgage Guarantee Scheme is a UK government initiative that enables lenders to offer 95% loan-to-value (LTV) mortgages to buyers with a 5% deposit. The government provides a guarantee to participating lenders covering a portion of net losses above a certain threshold if a borrower defaults. This reduces the risk to lenders and enables them to offer high LTV mortgages at rates that would not otherwise be commercially viable.

How the Mortgage Guarantee Scheme Works

The scheme operates as a guarantee between HM Treasury and the participating lender - not between the government and the borrower. When a borrower takes out a 95% LTV mortgage under the scheme, the lender receives a government guarantee covering losses on the portion of the loan between 80% and 95% LTV if the property is repossessed and sold at a loss.

As a borrower, you apply for a mortgage in the normal way from a participating lender. You do not apply for the guarantee separately. The lender decides whether to use the scheme for your application based on its own underwriting criteria. The existence of the guarantee does not change your mortgage contract - your liability remains the full mortgage balance.

Who Can Use the Mortgage Guarantee Scheme?

• First-time buyers and existing homeowners (home movers) are both eligible
• The property must be your main residence - it cannot be used for buy-to-let or second homes
• Property purchase price must not exceed £600,000
• The mortgage must be a capital repayment mortgage - interest-only mortgages are excluded
• New build and existing properties are both eligible
• You must meet the individual lender's standard affordability and credit criteria

Scotland has its own separate scheme - the Low-cost Initiative for First Time Buyers (LIFT) - administered by the Scottish Government. The UK Mortgage Guarantee Scheme does not apply in Scotland.

Participating Lenders

The list of lenders participating in the scheme is maintained and updated at gov.uk. Major lenders that have participated include Barclays, Halifax (part of Lloyds Banking Group), HSBC UK, Lloyds Bank, NatWest, Santander UK, and Virgin Money. Not all participating lenders offer the scheme across all their mortgage products or distribution channels - some offer scheme mortgages only through mortgage brokers.

Lenders set their own mortgage rates for 95% LTV products - the government guarantee affects lender risk but does not set a rate. Compare 95% LTV products from multiple participating lenders to find the best available rate.

Mortgage Guarantee Scheme vs Help to Buy

Is a 5% Deposit Mortgage Right for You?

A 95% LTV mortgage carries a higher mortgage rate than lower LTV products and means you start with minimal equity in the property. If house prices fall after purchase, you could find yourself in negative equity - where the mortgage balance exceeds the property value. Key considerations:

• 95% LTV rates are typically 0.5% to 1% higher than 90% LTV rates from the same lender
• A 10% deposit significantly improves the rates available and reduces monthly payments
• Stamp duty costs, solicitor fees, and survey costs must be covered separately from the deposit
• If you can save a larger deposit over 12 to 24 months, the long-term cost saving is usually significant

What is the Mortgage Guarantee Scheme?

The UK Mortgage Guarantee Scheme allows buyers to purchase a property with a 5% deposit. The government provides a guarantee to participating lenders covering losses on the 80-95% LTV portion of the mortgage if the borrower defaults. Borrowers apply directly to a participating lender - not to the government.

Is the Mortgage Guarantee Scheme still available in 2026?

Yes. The scheme was made permanent in 2025 and has no expiry date. It applies to properties up to £600,000 in England, Wales, and Northern Ireland. Scotland has a separate scheme called LIFT.

Which lenders offer the Mortgage Guarantee Scheme?

Participating lenders include Barclays, Halifax, HSBC UK, Lloyds Bank, NatWest, Santander, and Virgin Money. The full and current list is maintained at gov.uk. Not all lenders offer scheme mortgages through all channels - some are broker-only.

Can home movers use the Mortgage Guarantee Scheme?

Yes. Unlike Help to Buy (now closed), the Mortgage Guarantee Scheme is available to both first-time buyers and existing homeowners who are moving home. The property must be your main residence, not a buy-to-let or second home.