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The new 95% mortgage guarantee scheme: what you need to know

The Government is set to launch a 95% mortgage guarantee scheme. Find out what you need to know about the plan and what it could mean for you.

If getting on (or moving up) the property ladder is at the top of your list of financial goals this year, the Budget delivered by the Government on March 3rd included some good news: a mortgage guarantee scheme designed to help people buy a home with a deposit as low as 5%.

It’s a response to the sharp fall in availability of high loan-to-value (LTV) mortgage products during the COVID-19 pandemic, which has made it harder for people with smaller deposits to buy a property.

How will the scheme work?

Due to launch in April 2021, this new initiative will see the Government guaranteeing the portion of high-LTV mortgages over 80% of the purchase value of the home.

What that means in practice is that, if the homeowner fails to make their mortgage repayments and the property has to be repossessed, the Government will compensate the lender for a portion of its net losses. The idea is that this will make mortgage providers more willing to lend at up to 95% LTV, since the Government will be taking on some of the risk.

Delivering his Budget speech, Chancellor Rishi Sunak said big banks including Lloyds, Natwest, Santander, Barclays and HSBC will all be taking part, while other suppliers including Virgin Money would “follow shortly after”.

Participating lenders will have to offer a five-year fixed-rate product as part of their range, to give borrowers the option to secure predictable repayments for a longer period.


You’ll be eligible to apply for mortgages under the scheme if you meet these criteria:

  • You’re buying a property to live in yourself (so no second homes or buy-to-let properties)
  • You’re buying a home that costs no more than £600,000
  • You’re applying for a repayment (not interest-only) mortgage
  • You pass standard affordability checks, including a loan-to-income test and credit assessment
  • The mortgage you’re applying for is between 91% and 95% of the value of the property you’re buying

The scheme is open to both first-time buyers and home movers, and covers existing properties as well as new builds.

It’s initially due to run until December 2022, but that could be reviewed before the end date.

Police prioritised for London housing

In another bit of good news for Metropolitan Police officers and staff, the Mayor of London has announced a plan to put key workers at the front of the queue to access new affordable homes being built across the capital.

Sadiq Khan will work with trade unions, emergency services and local authorities to draw up a list of essential groups who have been vital in keeping London running during the pandemic. The list will include police officers, firefighters, NHS staff, transport workers and teachers.

Under new planning guidelines, boroughs will prioritise people in these occupations for buying or renting homes below market rates.

This is in response to a consultation on intermediate housing in London, which is aimed at people who are unlikely to access homes at social rent levels, but may be unable to afford to buy or rent on the open market.

Mr Khan said: “Making it easier for key workers to live in the city they serve with such dedication is the very least they deserve. Housing costs have driven far too many Londoners away, robbing us of their skills and expertise. Providing more access to intermediate housing, alongside much-needed homes for social rent, will play a vital role in turning that tide.”

Don’t miss out on £1,000 of free money per tax year from the Government

If these announcements have pushed buying a home up your list of priorities for this year and beyond, you might be thinking about how you can step up your savings and make the most of your money.

With the Metfriendly Lifetime ISA (LISA), you can save up to £4,000 a year, tax-free, to go towards buying your first home or your retirement fund.

You’ll get a government top-up of 25% (up to £1,000 per year) on whatever you save. What’s more, you’ll get a guaranteed annual bonus from us, as well as a possible final bonus if you invest for a further three full tax years.

You can apply for a LISA online if you’re aged between 18 and 40 and want to start putting away savings specifically for your first home purchase or retirement. You can keep paying into a LISA right up until your 50th birthday.  So, as an example of how much you could gain, if you were to open a LISA at age 18 and save the maximum amount for 32 years, at age 60 (when you can withdraw your savings without penalty) you would get £32,000 of free government money.

Even if you’re aged 35 and already a homeowner, you could still open a LISA and save the maximum amount each year to get £15,000 from the government when you turn 60. There’s also the option to continue saving into your LISA after using it to buy your first home, to build up your tax-free retirement fund.

For more information or to apply for the Metfriendly Lifetime ISA, click below.

The Metfriendly Lifetime ISA

To talk through your savings options, give our friendly team a call on 01689 891454, or book a one-to-one consultation. You can also leave your details with us and we’ll call you back at a convenient time for you.


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