Saving a large deposit remains one of the biggest hurdles for homebuyers in the UK, particularly for those looking at new build properties where prices can be higher than equivalent resale homes. The Mortgage Guarantee Scheme (MGS) was introduced by the government to address this barrier, encouraging lenders to offer 95% loan-to-value (LTV) mortgages to buyers who might otherwise struggle to secure finance with a small deposit.
For new build buyers, this scheme can be transformative — turning a 5% deposit on a £300,000 home (just £15,000) into a viable route to ownership. But how exactly does the government guarantee work, which lenders participate, and are there any specific considerations for new build purchases? This guide covers everything you need to know about the Mortgage Guarantee Scheme in 2026.
How the Mortgage Guarantee Scheme Works
The Mortgage Guarantee Scheme is not a loan to the buyer. Instead, it provides a government guarantee to mortgage lenders that covers a portion of their potential losses if a borrower defaults on a 95% LTV mortgage. This guarantee encourages lenders to offer high-LTV products that they might otherwise consider too risky, particularly in uncertain economic conditions.
Here’s how the mechanics work:
The crucial point to understand is that the guarantee is for the lender, not the buyer. If you default on your mortgage, you are still fully liable for the debt. The guarantee simply reduces the lender’s risk, which in turn makes them willing to offer you a 95% LTV mortgage at a competitive rate.
Participating Lenders
A number of major UK lenders have signed up to the Mortgage Guarantee Scheme. While not every lender participates, the scheme includes enough of the major players to ensure wide availability of 95% LTV products.
Importantly, not all 95% LTV mortgages on the market use the government guarantee. Some lenders offer their own 95% LTV products without relying on the scheme. From a buyer’s perspective, this doesn’t make a practical difference — you still get a 95% LTV mortgage either way. However, the government scheme has helped maintain overall availability and competitive pricing in the high-LTV market, particularly during periods of economic uncertainty.
When comparing products, work with a whole-of-market mortgage broker who can assess both MGS-backed and non-guaranteed 95% products. The best deal for your circumstances may not always be the one using the government guarantee — what matters is the overall rate, fees, and terms you’re offered.
New Build Eligibility and Considerations
New build properties are eligible for the Mortgage Guarantee Scheme, but there are specific considerations that buyers should be aware of. Lenders have historically been more cautious about high-LTV lending on new builds due to concerns about the new build premium — the potential for new properties to experience a short-term dip in value after purchase.
One important point: while the scheme’s property price cap is £600,000, individual lenders may set their own lower limits for new builds at 95% LTV. Some lenders will only offer 95% on new build houses up to £500,000, or may restrict 95% new build flats to certain types or heights. Always check the specific lender’s criteria for new build acceptance before proceeding.
For new build flats, be particularly aware of the distinction between purpose-built flats in blocks under 4 storeys (usually straightforward) and high-rise flats (where some lenders have additional restrictions). Post-Grenfell building safety requirements have made lenders more cautious about lending on taller residential buildings, and this intersects with the MGS in terms of which new build properties are eligible for 95% LTV.
Impact on Mortgage Rates
A common question is whether the Mortgage Guarantee Scheme means cheaper mortgages. The answer is nuanced. The scheme doesn’t directly set or cap interest rates — lenders are free to price their products as they see fit. However, the guarantee reduces lender risk, which in turn allows them to offer more competitive rates than they might otherwise.
The rates above are indicative and will vary by lender, product type, and individual circumstances. However, the general pattern is clear: higher LTV means higher rates. The premium for 95% LTV compared to 90% LTV is typically 0.3–0.6%, which on a £285,000 mortgage could mean an additional £70–£140 per month in repayments.
This is why many buyers benefit from increasing their deposit even slightly. If you can stretch to a 10% deposit (90% LTV), the rate improvement is often significant enough to offset the extra time spent saving. For new build buyers, developer incentives that effectively increase your deposit percentage can be particularly valuable — a £5,000 contribution from a builder towards your fees frees up £5,000 of your savings to put towards the deposit instead.
Comparison with Other 95% LTV Products
The Mortgage Guarantee Scheme isn’t the only way to get a 95% LTV mortgage. Several other products and approaches exist for buyers with small deposits.
For new build buyers specifically, developer-backed deposit contribution schemes are also worth considering. Some developers offer to contribute towards your deposit or exchange deposit, effectively reducing the cash you need upfront. However, be cautious: some builder incentives that inflate the property price to fund a “deposit contribution” can create issues with lender valuations. Legitimate builder incentives should be disclosed to the lender and are typically capped at 5% of the property value for high-LTV mortgages.
Pros and Cons for New Build Buyers
Current Status and Outlook for 2026
The Mortgage Guarantee Scheme was originally launched in April 2021 and has been extended multiple times. As of 2026, the scheme remains active, with the government having confirmed its continuation to support the housing market and maintain the availability of high-LTV lending.
The scheme has largely achieved its primary objective: ensuring that 95% LTV mortgages remain widely available and affordably priced. Before the MGS, the COVID-19 pandemic had caused a near-total withdrawal of high-LTV products from the market. The scheme restored confidence and lender participation, and even as the economy has stabilised, it continues to provide a backstop that keeps the market functioning.
For new build buyers in 2026, the key practical impact is that 95% LTV mortgages remain available and competitively priced. Whether or not a specific product uses the government guarantee is largely irrelevant to you as the borrower — what matters is getting the best rate and terms for your circumstances.
If you’re considering a new build purchase with a 5% deposit, we recommend speaking to a mortgage broker at least 3–6 months before you plan to reserve a plot. This gives you time to explore all options, compare products, and ensure your application is as strong as possible. Combined with first-time buyer stamp duty relief and developer incentive packages, the Mortgage Guarantee Scheme makes new build homeownership more accessible than many first-time buyers realise.
For those who may also be eligible for the Armed Forces Help to Buy scheme, combining the interest-free advance with a mortgage under the Guarantee Scheme can be especially effective. The FHTB advance increases your deposit, potentially bringing you into a lower LTV band and securing a better rate. Similarly, key worker housing schemes may offer additional support that reduces the amount you need to borrow.
The bottom line: the Mortgage Guarantee Scheme has normalised 95% LTV lending and made it a viable, mainstream option for new build buyers with smaller deposits. While the rate premium compared to lower-LTV products is a trade-off, for many buyers the ability to purchase years earlier — and benefit from property appreciation in the meantime — makes this scheme a worthwhile route to new build homeownership.