UK Mortgage Guarantee Scheme 2026: 5% Deposit Mortgages

The UK mortgage guarantee scheme makes 95% loan-to-value mortgages available by having the government guarantee the riskiest portion of the loan to the lender. For buyers who have saved a 5% deposit but cannot stretch to 10%, it can open the door to homeownership years earlier than waiting to save more. The scheme is open to all buyers -- not just first-time buyers -- and covers properties up to £600,000.

How the government guarantee works

When a lender offers you a 95% LTV mortgage under the scheme, they simultaneously purchase a government guarantee covering the 5-15% slice of the loan value. If you default on the mortgage and the property is repossessed and sold at a loss, the government pays out on the guarantee -- covering the lender's losses on that portion of the loan.

This guarantee de-risks the lender's position, making it commercially sensible for them to lend at 95% LTV when they might otherwise require a 10% or 15% deposit. Without the guarantee, lenders face significant capital requirements for high-LTV lending and the credit risk of negative equity in a falling market.

Important: the guarantee is between the government and the lender. You, as the borrower, have no special protection from it. You still owe the full mortgage, you still face repossession if you miss payments, and you still carry the downside if property values fall and you fall into negative equity. The guarantee simply makes the lender willing to offer you the product in the first place.

Eligible properties and buyers

The scheme's eligibility criteria are deliberately broad:

Property requirements:

• Maximum purchase price: £600,000.
• Must be a residential property in the UK.
• Must be your primary residence -- not a buy-to-let or holiday home.
• Both new-build and existing (second-hand) properties are eligible.
• The property must be suitable for standard mortgage purposes (no unusual construction types that lenders exclude anyway).

Buyer requirements:

• Any individual buying as their primary residence -- first-time buyers, home movers, or people returning to the market after renting.
• Must be taking out a repayment mortgage (capital and interest), not interest-only.
• Must pass the lender's standard affordability and credit checks.
• No specific income cap.

The absence of a first-time buyer restriction is a key difference from Help to Buy (which was primarily aimed at first-time buyers). Home movers who have equity in their existing home but find a larger deposit difficult -- perhaps due to being in a short-term rental while waiting for their sale to complete -- can also use the scheme.

What 95% LTV actually costs you

Borrowing at 95% LTV means you have less equity cushion, and lenders price that risk into the rate. In 2026, the indicative comparison looks approximately like this:

• 60% LTV 5-year fix: around 3.8-4.2%
• 75% LTV 5-year fix: around 4.0-4.4%
• 90% LTV 5-year fix: around 4.5-4.9%
• 95% LTV 5-year fix: around 5.0-5.6%

On a £200,000 mortgage (£210,000 purchase, 5% deposit = £10,500), the difference between a 90% LTV rate and a 95% LTV rate of 0.5 percentage points costs approximately £83 per month extra -- or around £5,000 over a 5-year fixed period.

As you make repayments and -- hopefully -- benefit from property value growth, your LTV will fall. Once you remortgage at 90% or below, the rate premium disappears. The 95% LTV premium is therefore a cost of the entry point, not a permanent feature of your mortgage.

Participating lenders

The major banks and building societies participate in the scheme, though the specific products they offer change regularly. In 2026, participating lenders have included Barclays, Halifax, Lloyds Bank, NatWest, Nationwide Building Society, Santander, HSBC and Virgin Money, among others.

Not all lenders offer all property types at 95% LTV -- some have restrictions on new-build properties, flats above a certain number of storeys, or properties with certain construction types. A mortgage broker with whole-of-market access is the most efficient way to identify which lender's 95% LTV product is most suitable for your specific property and circumstances.

Help to Buy vs the mortgage guarantee scheme

Help to Buy (Equity Loan) -- which closed to new applications in October 2022 -- was a fundamentally different mechanism. Under Help to Buy:

• The government lent you 20% of the purchase price (40% in London) as an equity loan.
• You needed a 5% cash deposit and took a 75% (55% in London) mortgage.
• The equity loan was interest-free for 5 years, then interest-bearing.
• The government retained a stake in your property -- when you sold or repaid the loan, you repaid 20% (or 40%) of whatever the property was worth at that time.
• It was only available on new-build properties.

The mortgage guarantee scheme does not lend you any money and does not retain a stake in your property. It simply enables the lender to offer you a 95% mortgage on a standard basis. There is no equity loan to repay, no government share of your future gains, and no restriction to new-build only.

Lifetime ISA as an alternative deposit-building tool

The Lifetime ISA (LISA) is often discussed alongside the mortgage guarantee scheme as a first-time buyer tool. The LISA gives a 25% government bonus on contributions up to £4,000 per year -- a maximum bonus of £1,000 per year -- which can be used towards a first home purchase.

Key LISA constraints:

• Only available to first-time buyers (unlike the guarantee scheme).
• Property purchase price limit: £450,000 (much lower than the scheme's £600,000).
• Must be held for at least 12 months before use.
• Withdrawal for non-qualifying purposes incurs a 25% penalty (which eats into your own contributions, not just the bonus).

The two approaches can be combined: a first-time buyer could use a LISA to build their deposit over several years (benefiting from the government bonus) and then, if the property they wish to buy is between £450,001 and £600,000, use the mortgage guarantee scheme rather than the LISA to fund the purchase -- taking their LISA savings as the deposit without using the LISA bonus for the purchase itself.

For properties under £450,000, using the LISA for the deposit and then applying for a 95% LTV product (guaranteed or otherwise) gives access to both the bonus and the scheme's product availability.

Sources

• gov.uk: Mortgage Guarantee Scheme
• UK Finance: Mortgage lending statistics 2026
• Money Saving Expert: Best 95% LTV mortgages
• gov.uk: Lifetime ISA guidance