The property ladder has never felt steeper, with many aspiring homeowners and first-time buyers struggling to save for a deposit. Enter Labour’s Freedom to Buy mortgage guarantee scheme, now a permanent government mortgage scheme designed to give first‑time buyers and home movers a helping hand when deposit savings are tight.
In this article, we explain:
- What is the new 2025 mortgage guarantee scheme, aka Freedom to Buy?
- How does the government mortgage scheme work?
- Who is the Freedom to Buy scheme for?
- Why was this government mortgage scheme introduced?
- Why the scheme matters, and where to be mindful
- How to apply for the government mortgage guarantee scheme
Let’s walk through these key points together.
What is the Mortgage Guarantee Scheme?
Remember the Help to Buy mortgage guarantee scheme of 2013? It aimed to help people secure 95% loan‑to‑value (LTV) mortgages with just a 5% deposit, backed by a government guarantee for lenders. The scheme closed in 2016, but a new temporary version was reintroduced in April 2021. As of July 2025, Labour has rebranded it as a permanent Help to Buy mortgage guarantee scheme, calling it Freedom to Buy in their 2024 manifesto.
In essence, Freedom to Buy is a continuation of the mortgage guarantee scheme, where the government acts as a backstop, encouraging lenders to offer high‑LTV mortgages to UK home‑buyers.
How does the Government Mortgage Scheme work?
The Freedom to Buy mortgage guarantee scheme offers lenders a financial guarantee from the government when they provide borrowers with a 95% loan-to-value (LTV) mortgage. This makes it less risky for lenders to approve low-deposit loans and gives more first-time buyers and home movers access to the market with just a 5% deposit.
While you won’t necessarily see the guarantee as a buyer, it plays an important role behind the scenes in making these high-LTV mortgages more widely available.
| Behind‑the‑scenes guarantee | You won’t apply directly to the government. Instead, mortgage lenders buy a guarantee to cover part of high‑LTV mortgages, usually between 80% and 95% of the property value. If a borrower defaults, the government covers the lender’s losses in that range. |
| Eligibility limits | Deposit: 5–9%, for 91–95% LTV mortgages Primary residence only: Does not apply for buy‑to‑let or second homes Property value cap: Currently max £600,000 Available for first‑time buyers, home movers, and remortgagers: Not limited to new builds |
| Guarantee timeframe | Guarantees last for up to seven years from the start of the mortgage. |
Who is the Freedom to Buy Mortgage Guarantee Scheme for?
Freedom to Buy is aimed at buyers who:
- Have saved only a 5% deposit (for example £10,000 on a £200,000 home).
- Are first‑time buyers or home movers needing a small deposit mortgage solution.
- May be remortgaging their main residence.
- Do not want to rent or use equity release.
- Are purchasing a property worth up to £600,000.
This doesn’t suit those who have already saved a larger deposit, are looking for investment properties, or are buying homes above the price cap.
Why was the Mortgage Guarantee Scheme introduced?
The Freedom to Buy scheme was introduced to tackle one of the biggest barriers to home ownership in the UK: saving for a deposit. With rising house prices and the cost of living squeezing savings, many otherwise mortgage-ready buyers have been locked out of the market.
This government mortgage scheme was designed to make low-deposit mortgages more accessible, keep the housing market moving, and provide long-term support for first-time buyers and movers alike.
Countering deposit barriers
With house prices at an average of approximately £269,000 (up 3.9% year‑on‑year in May 2025), many buyers find it hard to save the recommended 20% deposit. The new government mortgage scheme is designed to help those who have managed a 5–9% deposit make their way onto the property ladder.
Stimulating market activity
Introduced during the pandemic, the temporary scheme aimed to support housing market recovery. Now, as Labour makes it permanent, the goal is to offer consistency and prevent sharp drop‑offs in available low‑deposit mortgages.
Market stability in downturns
Labour’s reasoning is that, during economic slowdowns, lenders scale back high‑LTV mortgages. Freedom to Buy means these low-deposit mortgages remain available, helping first‑time buyers and movers stay on the ladder.
Why Freedom to Buy helps borrowers, and what to watch out for
While the Freedom to Buy scheme offers a real lifeline for those with smaller deposits, it’s important to weigh the benefits against the potential downsides. Like any mortgage product, it won’t suit everyone, and understanding both the opportunities and the risks is key. Below, we’ve broken down some of the main pros and cons to help you see how this government mortgage scheme might work for you.
Pros of the Government Mortgage Scheme are…
- Reduced deposit hurdle: makes homeownership more accessible.
- More choice of mortgages: because the scheme is now permanent, lenders are more likely to keep offering 95% mortgages, even when the market is uncertain.
- Market competition: more lenders may offer 95% mortgages more often.
Cons of the Government Mortgage Scheme are…
- Higher interest rates: high-LTV mortgages typically come at a price.
- Greater monthly costs: borrowing more means higher repayments, especially if rates rise.
- Doesn’t fix affordability: without boosting supply, house prices remain high.
- Potential risks of negative equity if values fall.
How does the Freedom to Buy Government Mortgage Scheme work for you?
So, what does the Freedom to Buy scheme look like in practice? While the government guarantee happens behind the scenes, the steps you’ll take as a buyer are simple and familiar.
From saving your deposit to getting a mortgage offer and completing your purchase, here’s how the scheme fits into the home-buying journey, and what you can expect along the way.
- Save a 5% deposit, e.g. £12,500 on a £250,000 home.
- Secure an Agreement in Principle with your lender or broker.
- Find a 91–95% loan-to-value (LTV) mortgage. A broker can help you identify which lenders are offering deals supported by the Freedom to Buy government mortgage scheme.
- Your lender processes your application, and the government guarantee is arranged behind the scenes.
- Complete your purchase and enjoy home ownership with 5% deposit.
- Repay over the mortgage term, typically 25–30 years.
Throughout the process of securing your mortgage with the new government scheme, brokers like Key Solutions Mortgages help with navigating lenders, explaining different mortgage types, and choosing between fixed vs variable rate mortgages, and protection.
How to apply for the government Mortgage Guarantee Scheme
If you’re ready to take the next step, the good news is that applying for the Freedom to Buy scheme is straightforward. You don’t need to apply to the government directly, instead, the scheme works through participating lenders.
Here’s how the process works and what you’ll need to know to get started.
- Speak to a mortgage broker or a lender offering 95% LTV mortgages.
- Confirm if your deal is backed by the Freedom to Buy government guarantee (not all 95% products are).
- Make sure you meet the standard eligibility criteria. This includes buying a primary residence worth £600,000 or less, having a deposit between 5% and 9%, and passing the lender’s income and affordability checks.
- Once you’re approved, the lender will complete the application and handle the guarantee process directly with the government. There’s nothing extra you need to do!
Useful to know: Other low-deposit options and support
While the Freedom to Buy government mortgage scheme is a valuable route for many buyers, it’s not the only one. Here are a few important points to be aware of when considering your options:
You don’t need the scheme to borrow at 95%
Some lenders offer 95% loan-to-value mortgages outside of the Freedom to Buy scheme. However, lenders using the mortgage guarantee scheme may feel more confident and could offer more competitive rates and terms.
100% mortgages do exist, but with caution
A small number of lenders offer up to 100% mortgages (no deposit needed), usually in very specific circumstances, like family guarantees or track record-based lending. These loans come with higher risk for the lender, and that’s reflected in the higher interest rates or stricter criteria.
There are other schemes and incentives available
Options like Shared Ownership, First Homes, and Lifetime ISAs can also support homebuyers, especially those with smaller deposits or unique needs. A mortgage broker, like Key Solutions, can walk you through these alternatives and help you choose the path that best fits your circumstances.
Final Thoughts on the Freedom to Buy Government Mortgage Scheme
Freedom to Buy, Labour’s permanent government mortgage guarantee scheme, offers a genuine lifeline for those struggling with deposit savings. It provides:
- Access to 5% deposit mortgages
- Security for lenders, which stabilises the mortgage market
- More routes onto the ownership ladder for first-time buyers and movers
Yet, it’s not a miracle cure:
- Borrowing more means more risk and possibly cost
- It doesn’t resolve the larger issues of housing supply and affordability
At Key Solutions Mortgages, our mission is to help clients understand schemes like Freedom to Buy and make informed decisions on their mortgage options. We’ll demystify paperwork, explain costs, and secure deals tailored to your situation.
If you’re wondering how to benefit from the government’s Mortgage Guarantee Scheme, reach out. Whether you’re a first-time buyer or moving home, Labour’s Freedom to Buy scheme may be the door-opening opportunity you’ve been waiting for. Contact us today and let’s walk through it together.
