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Rachel Reeves unveils lasting 95% home mortgage insurance program

First-time buyers and home movers will now have the opportunity to purchase properties using mortgages, thanks to a new scheme, requiring only a 5% deposit.

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Government Official Rachel Reeves unveils long-term guarantee program for mortgages, setting a...
Government Official Rachel Reeves unveils long-term guarantee program for mortgages, setting a standard of 95% coverage

Rachel Reeves unveils lasting 95% home mortgage insurance program

UK Launches Permanent Mortgage Guarantee Scheme to Boost Homeownership

The UK government has introduced a new permanent Mortgage Guarantee Scheme in July 2025, aimed at making homeownership more accessible for first-time buyers and home movers with smaller deposits [1][3][5]. This scheme allows eligible individuals to purchase a home with a deposit as low as 5% throughout the UK.

Under the scheme, lenders can provide 95% loan-to-value (LTV) mortgages with the support of a government-backed partial guarantee. This guarantee insures lenders against part of their losses on high LTV loans, up to a maximum liability cap of £3.2 billion [2]. The scheme applies to properties valued up to £600,000 [1].

The mortgage guarantee scheme is designed to help those struggling to raise larger deposits and keep the housing market active by encouraging lenders to offer mortgages to borrowers with smaller deposits, rather than relying on external guarantors like family [1][5].

Lenders remain liable for the full loan amount and pay a commercial fee to the Treasury to participate in the scheme [2]. The government’s guarantee covers a portion of losses for up to 7 years after the mortgage is issued [2].

Rob Houghton, founder and CEO of Reallymoving, has stated that while the scheme solves one barrier to home ownership (small deposit), it may exacerbate the other (affording repayments) [6]. He emphasizes that increasing supply is the key to making home ownership more affordable in the long term [6].

The scheme replaces a similar program by the previous Conservative government, which ended in June 2025 [3]. Since 2021, over 53,000 mortgages valued at £10.7 billion have been completed under earlier versions of this scheme [3][5].

In addition to the mortgage guarantee scheme, Nationwide will make its "Helping Hand" mortgage, which offers lending of up to six times' income, available to people with lower incomes [4]. The Treasury has also committed to a review of Financial Conduct Authority lending rules that could allow a prospective buyer's record of paying rent on time to show they can afford mortgage repayments [7].

However, the Bank of England has warned that millions of mortgage holders are set to see their payments rise as they roll off lower-rate deals onto more expensive ones, with an average rise of £107 a month [7]. The chancellor has announced that more mortgages will be lent at over 4.5 times a home buyer's income [8].

The chancellor, Rachel Reeves, has announced the new, permanent mortgage guarantee scheme, with eligible first-time buyers able to apply for the mortgage with a £30,000 salary, down from £35,000, and joint applicants with a £50,000 combined salary - down from £55,000 [8]. The scheme will be available to lenders from July 2025 [8].

The mortgage guarantee scheme is expected to support an additional 10,000 first-time buyers each year [3]. The fee for participating lenders will be regularly reviewed to cover expected claims against the guarantee [2].

[1] - BBC News, "UK launches permanent mortgage guarantee scheme" (accessed 15th July 2025)

[2] - Financial Times, "UK launches permanent mortgage guarantee scheme" (accessed 15th July 2025)

[3] - The Guardian, "UK permanent mortgage guarantee scheme to help 10,000 first-time buyers a year" (accessed 15th July 2025)

[4] - Nationwide Building Society, "Nationwide launches Helping Hand mortgages for lower income borrowers" (accessed 15th July 2025)

[5] - MoneySavingExpert, "UK permanent mortgage guarantee scheme explained" (accessed 15th July 2025)

[6] - The Telegraph, "Mortgage guarantee scheme solves one barrier to home ownership but exacerbates another, says Reallymoving" (accessed 15th July 2025)

[7] - The Times, "Millions of mortgage holders set for payments to rise" (accessed 15th July 2025)

[8] - Sky News, "Chancellor Rachel Reeves announces new, permanent mortgage guarantee scheme" (accessed 15th July 2025)

  1. The permanent Mortgage Guarantee Scheme, introduced by the UK government in July 2025, focuses on personal-finance concerns of first-time buyers and home movers, enabling them to purchase property with a small deposit of 5%.
  2. This scheme, applicable to properties valued up to £600,000, allows lenders to provide 95% loan-to-value (LTV) mortgages, with the government offering a partial guarantee to insure lenders against part of their losses on high LTV loans.
  3. The scheme aims to boost real-estate investments by encouraging lenders to offer mortgages to borrowers with smaller deposits, thereby keeping the housing-market active.
  4. Offering a solution to one barrier (small deposit), the scheme could potentially exacerbate the issue of affording repayments in the long term, as highlighted by financial expert Rob Houghton.

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