The Government is expected to announce the permanent replacement of the Mortgage Guarantee Scheme during the Mansion House Speech on 15 July 2025, in a move designed to support first-time buyers and drive UK economic growth.
Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said the change could offer a vital boost to borrowers with small deposits and create positive momentum across the mortgage market.
“The much-anticipated replacement of the Mortgage Guarantee Scheme is part of the Government’s plan to boost first-time buyers and will be a permanent policy to improve UK growth,” said Springall.
“Its creation should create a positive sentiment in the market and is designed to encourage more lenders to cater for borrowers with small deposits. As it stands, there are still very few deals on the market aimed at first-time buyers with just a 5% deposit, so any boost to product availability should be welcomed.”
The scheme is expected to play a key role in improving affordability conditions for prospective homeowners, particularly against a backdrop of limited housing supply and rising costs.
“First-time buyers are the lifeblood of the mortgage market, and they have been facing an excruciating situation to afford a mortgage, amid a short supply of affordable housing,” Springall continued.
“Not everyone can be reliant on the ‘Bank of Mum and Dad’ to get a foot onto the property ladder, such as with a guarantor mortgage. This is why it’s so fundamental for lenders to support buyers with small deposits, to keep the market moving.”
HM Treasury has indicated that the scheme’s design keeps exposure to risk low, with a cap on the Government’s contingent liability of £3.2 billion.
Springall added: “This scheme, along with lenders relaxing stress tests and the ongoing considerations about loan-to-income rules, is a great combination for first-time buyers struggling to afford a mortgage. However, those borrowing at the higher ends of the loan-to-value spectrum will have little equity in their homes as a result, and disaster could strike if house prices were to plummet.
“Therefore, seeking advice before entering any arrangement is vital, especially to ensure a deal is picked based on a competitive rate, fees and incentives.”
