In a major housing market intervention, Chancellor Rachel Reeves will announce a permanent mortgage guarantee scheme in her upcoming Mansion House speech on 15 July. The initiative, designed to help first-time buyers and home movers, will allow purchases with just a 5% deposit—a move aimed at boosting homeownership across the UK.
How the Scheme Works
Under the new policy:
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Buyers can secure a mortgage with a 5% deposit (95% loan-to-value).
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The government will guarantee a portion of lenders’ losses, reducing risk for banks.
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Guarantees last up to seven years per mortgage.
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Lenders pay a Treasury fee for each mortgage enrolled, with fees adjusted to cover potential losses.
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A £3.2 billion cap limits government exposure.
Emma Reynolds, Economic Secretary to the Treasury, confirmed the plan in June, stating it would “incentivise lenders to offer high-LTV mortgages long-term.”
Replacing the Conservative’s Temporary Scheme
This new Labour-backed scheme replaces the Conservative government’s 2021 version, which expired in June 2025. While the previous scheme helped over 39,000 households, critics argued it was too short-term to make a lasting impact.
Will It Actually Help Buyers?
While the policy lowers deposit hurdles, experts warn it doesn’t address affordability challenges:
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Rob Houghton (CEO, Reallymoving):
“A 5% deposit helps, but buyers still face high monthly repayments on a 95% mortgage. Without more housing supply, prices won’t stabilise.”
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Sarah Coles (Hargreaves Lansdown):
“This could push demand higher—but if supply doesn’t keep up, prices may rise further.”
The Bigger Picture: Housing Supply Crisis
For long-term affordability, experts argue increased construction is key. Labour has pledged to:
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Fast-track planning reforms
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Build 1.5 million new homes
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Prioritise brownfield development
Yet, with construction starts still lagging, critics question whether demand-side measures alone can fix the crisis.
What’s Next?
Reeves’ full announcement will clarify:
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Eligibility criteria
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Interest rate impacts
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Lender participation
For deeper analysis, check:
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BBC News on housing policy
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Financial Times for mortgage trends
Final Verdict
This scheme lowers the entry barrier but doesn’t solve high mortgage costs or supply shortages. Whether it succeeds depends on broader housing reforms.
Would you use a 95% mortgage? Share your thoughts below!
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