Freedom to Buy: The Permanent 5% Deposit Scheme Explained

In July 2025 the UK government made the previously-temporary Mortgage Guarantee Scheme permanent and rebranded it Freedom to Buy. It's not a deposit grant, it doesn't reduce house prices, and it's not a magic shortcut onto the ladder. What it does do is make 95% LTV mortgages, the ones where you only need a 5% deposit, much more widely available, by guaranteeing part of the loan for participating lenders. Here's how it actually works.

What Freedom to Buy actually is

Freedom to Buy is the renamed, permanent successor to the Mortgage Guarantee Scheme that originally launched in 2021. Under it, the UK government guarantees a portion of high-loan-to-value mortgages, specifically those between 91% and 95% LTV.

When a lender offers you a 95% mortgage, they take on more risk than they would on a 75% one. The government's guarantee covers part of that extra risk if the borrower defaults and the property is repossessed. That makes lenders more willing to offer 5% deposit deals, there are more products available, and pricing tends to be a bit more competitive than it otherwise would be.

What it ISN'T (very important)

Freedom to Buy is widely misunderstood. Three things it's NOT:

• It's not a deposit grant. You still need to save your 5% deposit. The government guarantees the lender, not you.
• It's not a special government mortgage product. You apply for a normal mortgage from a normal lender. The guarantee happens in the background between the lender and the Treasury, you don't see it.
• It's not free money. Your monthly payment is whatever the lender charges for their 95% LTV product. The guarantee makes those products more available; it doesn't lower the rate dramatically.

Who is eligible

The Freedom to Buy criteria are deliberately broad:

• First-time buyers and home movers are both eligible (Help to Buy equity loan was first-time-buyers only, this is wider).
• Properties up to £600,000. The price cap matters: a £610,000 home doesn't qualify for the guarantee on any portion.
• Must be a residential purchase. Not buy-to-let, not second homes, not holiday lets.
• Standard residential mortgage rules apply. You still pass affordability, credit checks, stress tests etc. The guarantee doesn't relax lender criteria, it just makes the product available.

How to access Freedom to Buy

You don't apply for Freedom to Buy directly, there's no government form, no separate application. You apply for a normal 95% LTV mortgage with a participating lender, and the guarantee happens automatically in the background.

Most of the big high-street lenders take part, Halifax, Lloyds, NatWest, Santander, Barclays, HSBC, Nationwide and Virgin Money among them. Some specialist lenders also participate. A mortgage broker can tell you which lender is best for your specific situation.

How it compares to other schemes

Several first-time buyer schemes are around in 2026, here's how Freedom to Buy fits in:

• Freedom to Buy: 5% deposit, up to £600k, any participating lender, broad eligibility. Live.
• First Homes Scheme: 30-50% discount on new builds, income cap £80k (£90k London), England only. Live.
• Shared Ownership: Buy 10-75% of a property, pay rent on the rest. Live (new model lease since 2021).
• Lifetime ISA: 25% government bonus on savings up to £4k/year, property cap £450k. Live but under consultation for replacement.
• Help to Buy equity loan: CLOSED. Final completions were March 2023. Replaced by Freedom to Buy.
• Help to Buy ISA: CLOSED to new applicants since November 2019. Existing holders can save until 2029, claim bonus by 2030.

The maths: what 5% deposit means in practice

A 5% deposit on a £250,000 property is £12,500. On a £400,000 property it's £20,000. On the £600,000 cap, it's £30,000.

Your mortgage payment on a 95% LTV deal will be slightly higher than on a 75% LTV equivalent, partly because the loan is larger relative to the property value, and partly because 95% rates are typically 0.3-0.7% higher than the best low-LTV deals. On a £250,000 95% mortgage at 5.2% over 30 years, your monthly payment would be around £1,305 (repayment basis).

Even with the higher rate, the gap between 'save 5% and buy now' vs 'save 10% and buy in a couple of years' is often worth crunching, for many buyers, especially with rents at current levels, getting on the ladder sooner beats waiting.

What to do next

If you're a first-time buyer or mover thinking about a 5% deposit purchase, the steps are:

• Get a sense of your borrowing capacity using our affordability calculator.
• Get an Agreement in Principle with a participating lender (broker can do this in a couple of hours).
• Start house-hunting within the £600,000 cap.
• Make sure you have enough savings on top of your 5% deposit for the buying costs: stamp duty (if applicable), conveyancing, valuation, survey, moving.

Freedom to Buy is the simplest and most accessible UK government scheme on the ladder right now, and the one most buyers benefit from, often without realising it. The mortgage your lender offers you probably IS already a Freedom to Buy product. If you'd like to know what 5% deposit mortgages you'd qualify for, Debbie at DS Financial can run the numbers and find you the best 95% LTV deal in the market.

General information, not financial advice. Your home may be repossessed if you do not keep up repayments on your mortgage.

Sources: Treasury, Mortgage Guarantee Scheme permanent, MoneyHelper, Government schemes for buyers, MoneySupermarket, Mortgage Guarantee Scheme.