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:

  • Buyers can secure a mortgage with a 5% deposit (95% loan-to-value).

  • The government will guarantee a portion of lenders’ losses, reducing risk for banks.

  • Guarantees last up to seven years per mortgage.

  • Lenders pay a Treasury fee for each mortgage enrolled, with fees adjusted to cover potential losses.

  • £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:

  • 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.”

  • 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:

  • Fast-track planning reforms

  • Build 1.5 million new homes

  • 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:

  • Eligibility criteria

  • Interest rate impacts

  • Lender participation

For deeper analysis, check:


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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