The Mortgage Guarantee Scheme is available in England to all homebuyers who can save a 5% deposit. This is on condition that the property will be your only home, located in the UK, and of a maximum value of £600,000. This scheme will run until the 31st of December 2022.

The government has said that they will enable the scheme to be used by lenders for both new-builds and existing properties, but lenders are not obliged to have to include both. Some lenders include both, but others will only include certain buildings and exclude flats and maisonettes. This varies from lender to lender.

The main, and most obvious benefit of 95% LTV mortgages is that they only require a 5% deposit, which means you can save for a deposit in less time. This could be especially important for first-time buyers, as house prices could increase at a faster rate than they can save.

However, as this means that lenders shoulder a greater risk of loss in the event the buyer defaults on their payments, it means that often the maximum amount that can be borrowed is less than mortgages with traditional deposits, irrespective of credit rating and income. This maximum usually sits at £250,000.

Additionally, because of the increased risk to the lender (because they are lending a greater sum of money with less deposit from the buyer), these mortgages will often command a higher interest rate than their counterparts. Usually, the higher the LTV ratio for the mortgage, the higher the interest rates are on the mortgage.

Furthermore, because (for example, in the case of taking out a 95% mortgage) you will start out with 5% of the value of your home, a buyer’s risk of being in negative equity will increase. This can occur when house prices drop, and your left owing more mortgage than the house is worth. As time passes and your percentage of ownership of the property increases, this will be increasingly negated.

Finally, it may be more difficult for you to remortgage. Because your percentage ownership of the property is low (for example, you paid a 5% deposit), your LTV will take longer to decrease to the point where you can get the better rates offered from remortgages.

In the aftermath of the COVID-19 pandemic, many areas in the finance industry were hit, including mortgages. Many high loan-to-value (the ratio of loan to the appraised value of a property) mortgages were discontinued during the pandemic, but thanks to government initiative, 90% and 95% mortgages have returned.

Certain lenders are now offering 90% and 95% mortgages again, that only require 10% or 5% deposits respectively. This means that prospective homebuyers, particularly first-time buyers, can save up for a house deposit faster than they previously could, meaning that you could own your own home sooner than before.