5% Deposit
Government Mortgage Guarantee Scheme

Carl Atkinson

2-minute read

Last updated: March 4th 2021

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You will able to use a new 5% mortgage government guarantee scheme to help get on the property ladder.

The new scheme was announced by Chancellor Rishi Sunak during his 2021 Budget speech and it is aimed at first time buyers with 5% deposits.

5% mortgage deposits are back

If you have a 5% deposit, which is a 95% LTV mortgage, you may have seen your chances at homeownership fall during the pandemic-stricken markets of the past 12 months. In fact, less than 10 were available during January 2021.

5% deposit mortgage graph

The government announced Natwest, Lloyds, Santander, Barclays and HSBC have already committed to joining the scheme.

Mr Sunak confirmed the government will offer banks and building societies more incentives to bring back their 95% options – traditionally seen as riskier investments on behalf of the lenders.

How does the new government mortgage guarantee scheme work?

In the government's own document on the new mortgage guarantee scheme, it states:

"The government will provide lenders with the option to purchase a guarantee on the top- slice of the mortgage. In other words, the government will compensate the mortgage lender for a portion of the net losses suffered in the event of repossession. The guarantee will apply down to 80 per cent of the purchase value of the guaranteed property."

5% deposit mortgages government scheme diagram

Other initial details about the government deposit mortgage guarantee scheme include:

  • It will launch in April 2021 and stay open unil December 2022
  • It will not be limited to new build homes
  • You don't need to be a first-time buyer
  • It is available for mortgage loans between 91 and 95% LTV
  • The property purchase price limit will be £600,000
  • Mortgages with fixed rates for up 5 years will be offered
  • It's only open to individuals seeking repayment mortgages, not limited companies, or BTL interest-only mortgages
  • Your mortgage will be guaranteed for up to 7 years

These details are similar to the Help to Buy mortgage guarantee scheme available from 2013 to 2016, which allowed 100,000 new homes to be purchased. Back then, 80% of these homes went to first-time buyers, this time the scheme is only available to you, as a first-time buyer.

Help to Buy mortgages back and government backed?

Speaking to the Commons, Mr Sunak said: "Owning a home is a dream for millions and we want to help as many people as possible," while the Prime Minister had previously stated he wants "generation rent" to become "generation buy".

"Young people shouldn't feel excluded from the chance of owning their own home and now it will be easier than ever to get onto the property ladder," the PM added.

Can I get a mortgage with 5%?


Banks and lenders have offered 95% mortgages in the past. It's just the number of these options has reduced dramatically over the past 12 months.

The new scheme takes some of the risk away for lenders as the government will guarantee to step in should any repayments be missed.

Of course, just because you can get a mortgage with a 5% deposit again, doesn't me you will. Your application will still be subject to all the usual eligibility and affordability checks.

Some well deserved good news for FTBs

Richard Hayes, Mojo Mortgages CEO, said:

The return of 5% deposit mortgages is well-deserved good news for first-time buyers.

Over the last 12 months, they've seen the mortgage market shrink before their eyes with more and more lenders pulling these deals due to wider economic concerns. Even the number of 90% LTV deals dropped by 500 to 277. It's tough to save up more than that at the moment!

The government-backed guarantee is massive for FTBs' home-buying plans in 2021. The fact that major lenders are lining up to get involved and roll out more 95% LTV options again is great for the whole market.

Mojo's worked hard to get many first-time buyers on the ladder in tough circumstances, so we welcome the chance to help people across the country use this new scheme – and the fact that it begins next month is really quite exciting.

New 5% mortgages not just for first-time buyers

The government confirmed the new mortgage guarantee scheme is not just available to FTBs. That means that if you're an existing homeowners with low levels of equity in your property you may be able to use the new mortgages to move to the next rung of the ladder.

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