First-Time Buyers in 2025: What the New Mortgage Guarantee Scheme Really Means

For first-time buyers, saving for a deposit has long been one of the biggest barriers to homeownership. In July 2025, the government introduced a permanent Mortgage Guarantee Scheme designed to make 95% loan-to-value mortgages more widely available. By offering lenders a partial government guarantee on these higher-risk loans, the scheme encourages banks to continue lending to borrowers with just a five percent deposit. In theory, this should make homeownership more accessible for young people and families without substantial savings or parental support.

The introduction of a permanent guarantee scheme signals a long-term policy shift. Previously, similar schemes were temporary measures that expired, leaving gaps in the availability of low-deposit mortgages. By making it permanent, the government hopes to ensure that 95% products remain available even when the market tightens. This is good news for first-time buyers who might otherwise struggle to get onto the housing ladder. However, the scheme does not reduce monthly mortgage costs, and affordability tests remain in place. Lenders still need to ensure borrowers can comfortably repay their loans, which means income, spending, and credit history will be carefully assessed.

There are also risks to consider. High loan-to-value mortgages leave buyers more exposed to fluctuations in property prices. If house prices fall, borrowers with only a five percent deposit could find themselves in negative equity, where their mortgage is worth more than their home. Lenders may also impose additional conditions, such as requiring deposits to come from the buyer’s own savings rather than gifts.

For those looking to buy, the scheme should be seen as a tool rather than a shortcut. Saving a larger deposit, even moving from five to ten percent, can open up better interest rates and reduce risks. Combined with smart budgeting and professional advice, the scheme can help first-time buyers move forward but it works best as part of a careful, well-planned strategy.