Mortgage Guarantee Scheme: Contingent Liability

Wednesday 11th June 2025 Written Statements

[The Economic Secretary to the Treasury (Emma Reynolds)]

Supporting first-time buyers is at the heart of this Government’s housing strategy as we aim to build 1.5 million new homes this Parliament. The Government recognise the difficulties that many aspiring homeowners face in getting on the housing ladder—in particular, the challenge of raising a sufficient deposit for a home. To tackle this problem head on, we committed to introduce a permanent mortgage guarantee scheme in our election manifesto to ensure buyers with smaller deposits can get a mortgage and fulfil their home ownership ambitions.

Today, I can confirm that the Government will be launching a new mortgage guarantee scheme in July 2025, delivering on our manifesto commitment to support homebuyers with smaller deposits across the UK. This Government are committed to home ownership, and we will continue to explore ways to help more prospective first-time buyers own their own homes. The scheme will be permanently available, helping to incentivise and sustain availability of 91% to 95% loan-to-value mortgages through the economic cycle by providing lenders with a Government-backed guarantee—this will insure lenders against a portion of their potential losses on those mortgages. Mortgages offered through the scheme will enable eligible first-time buyers and home movers to buy a home with a deposit as small as 5%.

Guarantees issued under the new, permanent scheme will be valid for up to seven years after the mortgage is originated. Participating lenders will pay HM Treasury a fee for each mortgage entered into the scheme. This will be set and regularly reviewed so that expected claims against the guarantee should be covered by revenue from the fee. To limit the Government’s exposure from the scheme, there will be a cap on the size of the Government’s contingent liability of £3.2 billion. HM Treasury judges the risk of incurring losses through the scheme to be low, which would only materialise if the sum of fees was not sufficient to cover calls on the guarantee.

Authority for any expenditure required under this liability will be sought through the normal procedure. HM Treasury has approved this proposal in principle. A departmental minute has been laid in Parliament today. If, during the period of 14 parliamentary sitting days, a member signifies an objection by giving notice of a parliamentary question or by otherwise raising the matter in Parliament, final approval to proceed with incurring the liability will be withheld pending an examination of the objection.

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