In July 2025, the UK government introduced a new mortgage guarantee scheme to incentivise lenders to keep offering 95% mortgages. Here’s all you need to know about it.
4 mins read
16-01-2026
Saving a sizeable deposit isn’t easy (especially when groceries now cost roughly the same as a city break). The good news? Buying a home with just a 5% deposit is still possible thanks to a mix of 95% mortgages and the UK’s permanent mortgage guarantee scheme.
Here’s what you need to know before you dive in.
A 95% mortgage lets you buy a home with a 5% deposit.
For example:
These products can be great for first-time buyers and movers who have steady income but haven’t managed to save a large deposit.
In July 2025, the UK government introduced a new, permanent mortgage guarantee scheme (also known as Freedom to Buy). Its purpose is simple: Encourage lenders to keep offering 95% mortgages by giving them partial protection if a borrower defaults.
A few key points:
Because lenders get some reassurance from the government, more of them are willing to offer high-LTV deals, even when the wider market is a bit wobbly.
You don’t "apply to the scheme”. You simply apply for a standard mortgage with a participating lender.
To qualify, you’ll generally need:
Think of it as a normal mortgage application, just with a smaller deposit.
Usually, yes. Lenders charge more for 95% mortgages because the risk (and the loan amount) is higher. Expect rates often higher than 90% or 80% mortgages, and differences that can range from around 0.5% to 1% or more, depending on the market and lender.
Even so, for many buyers the trade-off is worth it: you can get on the ladder sooner without waiting years to grow your savings.
Pros | Cons | |
|---|---|---|
Get on the ladder sooner: A 5% deposit is far more achievable than 10–20% for many buyers. | Higher monthly repayments: More borrowing + higher rates = a pricier mortgage. | |
Wider lender choice in 2026: With the new scheme now permanent, more lenders are expected to offer high-LTV options consistently | Greater risk of negative equity: If property prices dip, your small equity buffer disappears quickly. | |
Buy the home you need, not the one you can barely afford today: Useful for buyers whose incomes are growing but savings are still catching up. | Harder to remortgage later: If you don’t build equity fast enough, your next deal may be limited. |
It can be, especially if:
It may not be ideal if:
A 95% mortgage isn’t the only route to homeownership in 2026.
Save a bigger deposit
Even moving from 5% to 10% can unlock noticeably lower rates.
Shared Ownership
Buy part of a property and pay rent on the rest. Often requires a smaller deposit too.
Family-assist or "springboard" mortgages
A relative temporarily secures your mortgage with savings, helping you access better rates.
Lifetime ISA (LISA)
Boost your deposit with a 25% government top-up on savings (up to limits).
A 95% mortgage can be a powerful stepping stone for buyers who are ready to own but don’t have a big deposit sitting in the bank. And with the government’s permanent mortgage guarantee scheme supporting lenders behind the scenes, high-LTV options look set to remain part of the market for the long term.
Just make sure to weigh the costs carefully, check the latest rates, and speak to a broker who can help you find the right deal for your situation.
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Remember: This guide provides general information only. For advice specific to your situation, consider speaking to an independent financial adviser.