The Government’s Mortgage Guarantee Scheme is set to be extended, with details expected in the Mansion House Speech today, 15th July 2025.
The scheme is aimed at helping first-time buyers (FTBs) who have only a 5% deposit, as there are currently few products on the market for this group.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “The much-anticipated replacement of the Mortgage Guarantee Scheme is part of the Government’s plan to boost first-time buyers and will be a permanent policy to improve UK growth.
“Its creation should create a positive sentiment in the market and is designed to encourage more lenders to cater for borrowers with small deposits.
“As it stands, there are still very few deals on the market aimed at first-time buyers with just a 5% deposit, so any boost to product availability should be welcomed.”
Springall added: “First-time buyers are the lifeblood of the mortgage market, and they have been facing an excruciating situation to afford a mortgage, amid a short supply of affordable housing.
“Not everyone can be reliant on the ‘Bank of Mum and Dad’ to get a foot onto the property ladder, such as with a guarantor mortgage.
“This is why it’s so fundamental for lenders to support buyers with small deposits, to keep the market moving.”
She said: “Treasury has also stressed any losses incurred through the scheme would be low, and that there is a cap on the size of the Government’s contingent liability of £3.2 billion.
“This scheme, along with lenders relaxing stress tests and the ongoing considerations about loan-to-income rules, is a great combination for first-time buyers struggling to afford a mortgage.
“However, those borrowing at the higher ends of the loan-to-value spectrum will have little equity in their homes as a result, and disaster could strike if house prices were to plummet.”
She added: “Therefore, seeking advice before entering any arrangement is vital, especially to ensure a deal is picked based on a competitive rate, fees and incentives.”
Peter Stimson (pictured), director of mortgages at MPowered Mortgages, said: “Kudos to the Chancellor for delivering on an election pledge.
“The rebranded Mortgage Guarantee Scheme is a good idea. The trouble is it’s a year too late, and is missing one vital detail – the cost.
“The mortgage market has changed a lot since Rachel Reeves swept into 11 Downing Street last July.”
Stimson added: “The Base Rate has come down by a full percentage point and hundreds of 95% LTV mortgage products are now available.
“Every lender who wanted to offer a 95% loan is probably already doing so. The Chancellor’s announcement is unlikely to make dozens more suddenly follow suit – as the price of entry is unknown and will vary each year.
“The Freedom to Buy scheme shuffles some of the risk burden between lenders and the Government, but don’t expect it to make mortgages cheaper for borrowers.”
He said: “Much like the Mortgage Guarantee Scheme it replaces, the capital offered to mortgage lenders is likely to be at market rate rather than discounted.
“So while first-time buyers who aren’t able to call on the Bank of Mum and Dad may find it slightly easier to get a mortgage with a 5% deposit, they will still pay some of the highest interest rates.
“For all the Chancellor’s fanfare, big questions remain over the cost of Freedom to Buy and it will tweak, rather than transform, lending to first-time buyers.”
He added: “She would have done better to bring back an updated version of the Help to Buy scheme to boost both housebuilding and access to finance.
“Would-be buyers need more homes to be built, rather than tinkering with a product that the market is already providing on its own.”
