A key government scheme designed to support first-time buyers with small deposits onto the property ladder is due to expire at the end of June, with no confirmed replacement yet announced.
The mortgage guarantee scheme, first launched in April 2021, enables lenders to offer 95% mortgages by allowing them to purchase a government guarantee on the portion of the loan between 80% and 95% of the property’s value. If a borrower defaults and their home is repossessed, the government covers part of the lender’s losses, de-risking high loan-to-value lending.
Over its lifetime, the scheme has supported more than 53,000 completed mortgages, with first-time buyers accounting for 86% of those, according to government figures. The average property purchased through the scheme had a value of around £211,000.
The scheme is open to new home loan applications only until 30 June 2025, but despite earlier promises, the government has yet to publish any concrete plans for a successor.
In the Spring Budget, ministers pledged a new “permanent, comprehensive” version of the scheme, designed to “give banks and building societies the confidence to keep offering low-deposit mortgages” and expand access to home ownership for young families and renters. However, no further details have been shared since, leaving lenders, buyers and industry bodies in the dark.
The existing scheme has been praised for helping revive the high loan-to-value mortgage market in the aftermath of the pandemic, particularly as lenders had pulled back from riskier products during the COVID economic slowdown. At its peak, it was a crucial lifeline for many buyers unable to save more than 5% for a deposit.
Although not all lenders offering 95% mortgages have participated in the scheme, the government’s backing played a central role in restoring confidence across the sector. Data published last week shows the total value of the guarantees issued through the scheme stands at £1.6 billion, supporting £10.7 billion in mortgage lending overall.
Industry groups and housing experts have warned that allowing the scheme to lapse without a confirmed replacement could damage first-time buyer confidence and leave a significant gap in the market, particularly in regions where property affordability is more constrained.
With the 30 June cut-off fast approaching, calls are mounting for the Treasury to urgently confirm the next phase of its mortgage support plans. Until then, prospective buyers and lenders alike remain in limbo.
