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Everything you need to know about the 95% mortgage guarantee scheme

Looking to get on the property ladder, but struggling with a deposit? This new scheme could help.

First-time buyers and other eligible buyers could secure a mortgage with as little as a 5% deposit, thanks to new measures announced in the 2021 Budget.

The stamp duty holiday, which was introduced to help the housing market and buyers who may have wanted to relocate, has now ended and tax rates have returned to their pre-Covid state.

Chancellor Rishi Sunak said: “I’m announcing today a new policy to stand behind homebuyers: a mortgage guarantee.”

This scheme is great news for those looking to get on the property ladder with a lower deposit, but what exactly does this mean for buyers? How will the scheme work?

What is a 95% mortgage?

A 95% mortgage allows you to borrow 95% of the property’s purchase price from a bank or building society (the lender) while the final 5% is covered through your deposit.  Bear in mind that with a lower deposit, interest rates on mortgages may be higher than those with a larger deposit as lenders view 95% mortgages as higher risk.

Why a 95% mortgage scheme?

Data and studies have shown young adults' finances and employment prospects have been hit hard by the COVID-19 pandemic. The last year has seen fewer and fewer low-deposit mortgages available making buying property harder for younger generations.

How does the new 95% mortgage scheme work?

The new scheme which will launch in April will allow eligible first-time buyers and existing homeowners to purchase homes worth up to £600,000 with a deposit of just 5%.

As simple as this process seems, the same affordability checks will apply, not just anyone with a 5% deposit will be able to take out these mortgages. You still must prove that you can comfortably afford the monthly repayments after other essential spending (bills and amenities etc.) has been covered.

Would I be eligible for the scheme?

The scheme is in place to help creditworthy households struggling to save the higher deposit, and for the mortgage to qualify under the guarantee will need to:

  • Be a residential mortgage (not second home or buy-to-let)
  • Be a property in the UK with a purchase price of £600,000 or less
  • Meet standard requirements in terms of the assessment of the borrower’s ability to pay the mortgage, for example a loan-to income and credit score test.
  • Have a loan-to-value of between 91 per cent and 95 per cent
  • Be taken out by an individual or individuals rather than an incorporated company
  • Be originated between the dates specified by the scheme.

How much deposit do I need?

Your deposit will be directly affected by the price of the property you are purchasing and your affordability however, as there is a £600,000 limit on the value of purchase.

This scheme is aimed at younger buyers and those looking to get on the property ladder with a lower deposit. With the average property price at around £270,000, some buyers may be able to purchase a home with as little deposit as £13,500.

When does the scheme start?

The scheme will be available from April 2021 with well-known high street lenders already pledging their support.  Both first-time buyers and existing homeowners can take advantage of it. Homebuyers can purchase properties worth up to £600,000 with just a 5% mortgage.

Be careful not to confuse this with the Help to Buy equity loan scheme, which is still ongoing and is another way to buy a property with a 5% deposit.  See haart’s guide to Help to Buy here.


Most people need a mortgage before they buy a property.  Knowing how much you can borrow and getting the process underway before you make any offers can help speed up any move. 

For further information or to discuss your mortgage options please click here to arrange an appointment / contact Just Mortgages *on 0345 2185211 or email*


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