A major UK government initiative designed to support homebuyers with small deposits is set to expire at the end of June, with no confirmed replacement to follow. The mortgage guarantee scheme, introduced in 2021, enabled lenders to offer loans of up to 95% loan-to-value (LTV), easing access to homeownership for thousands.
Despite a February promise to establish a permanent and comprehensive version of the scheme, no further detail has been provided. The lack of clarity raises concerns for first-time buyers and lenders who had relied on the initiative to manage risk.
End of a Four-Year Scheme That Helped Over 50,000 Homebuyers
Launched in April 2021 under a Conservative government, the mortgage guarantee scheme was designed to address affordability barriers in the UK housing market, particularly for young families and first-time buyers.
According to The Guardian, the programme backed over 53,000 mortgages by the end of December 2024, with nearly 86% going to first-time buyers. The mechanism involved the government guaranteeing the portion of a mortgage between 80% and 95% of the property’s value.
In the event of a repossession, the state would compensate lenders for losses incurred on that upper tier. The scheme was open to repayment mortgages only, and explicitly excluded new-build properties, second homes, and buy-to-let investments.
As of last week, the total value of guarantees extended under the programme was £1.6 billion, supporting mortgages worth a combined £10.7 billion, with an average property value of around £211,000, according to The Guardian.
Despite its role in facilitating access to housing, not all 95% mortgages during this period used the government guarantee, with some lenders offering similar products independently.
Lack of Replacement Raises Concerns for Low-Deposit Buyers and Lenders
In February 2025, ministers announced plans for a “new, permanent, comprehensive mortgage guarantee scheme” aimed at giving banks and building societies the confidence to continue offering high LTV mortgages. The proposal was framed as part of a broader strategy to promote homeownership among “young families and hard-working renters.”
However, with less than a month before the scheme’s closure on 30 June, no replacement has been detailed. This gap in policy may impact lending behaviour, as the original scheme had been credited with encouraging banks to issue low-deposit loans despite market volatility.
The absence of a successor could leave prospective buyers facing reduced options, especially in regions where high property prices require substantial deposits. For lenders, the withdrawal of government-backed guarantees may increase risk exposure, potentially leading to tighter lending criteria.
Industry observers now await formal confirmation of whether the government will honour its February pledge, or allow the scheme to lapse without an alternative in place.
