Freedom to Buy: 5% Deposit Mortgages Explained

For most buyers, the deposit — not the monthly payment — is the wall between renting and owning. Freedom to Buy exists to keep the lowest rung of that wall in place: it is the government's permanent guarantee scheme that encourages lenders to keep offering 95% loan-to-value (5% deposit) mortgages even when the market turns cautious.

It is widely misunderstood. It is not a grant, it does not lower your rate, and it does not boost what you can borrow. This guide explains exactly what it does, who qualifies, and how to decide whether a 5%-deposit purchase — inside or outside the scheme — is the right move for you.

What Freedom to Buy is

Freedom to Buy launched in July 2025 as the permanent successor to the temporary Mortgage Guarantee Scheme, which ran from April 2021 to mid-2025. The old scheme had to be repeatedly extended and was always at risk of lapsing; Freedom to Buy removes that uncertainty by making the guarantee a standing feature of the market.

The aim is simple: low-deposit lending is the first thing lenders cut in a downturn, because a 95% loan leaves almost no equity cushion if prices fall. That is exactly what happened in 2020, when 95% LTV products all but vanished from the market within weeks. By standing behind part of that risk, the government keeps 5%-deposit products available through the cycle rather than only in good times.

For buyers, the permanence matters more than it might seem. Under the old temporary scheme, anyone saving towards a 5% deposit had no certainty the products would still exist by the time they were ready to buy. With Freedom to Buy, a 5% deposit is a stable, plannable target.

How the guarantee works

Under the scheme, the government guarantees a portion of the lender's losses if a 95% LTV mortgage goes into default and the property is repossessed and sold for less than the outstanding loan. The lender pays the government a fee for this protection.

Everything happens behind the scenes, between the lender and the Treasury. From your side, a Freedom to Buy mortgage looks and behaves exactly like any other 95% mortgage: you apply to the lender, pass its affordability and credit checks, and repay it on normal terms. You remain fully responsible for your mortgage — the guarantee protects the lender's losses, not yours.

It is also worth knowing that many lenders offer 95% LTV products outside the scheme, using their own risk appetite or private insurance instead. As a borrower you should not care which umbrella a product sits under — focus on the best overall deal at your deposit level.

Who qualifies

The main criteria:

• Property worth £600,000 or less, and it must be your primary residence.
• Loan-to-value above 90% and up to 95% (a deposit of 5% to just under 10%) — at 10% or more you are in standard 90% LTV territory and the scheme is irrelevant.
• Repayment mortgage only — interest-only is excluded.
• No buy-to-let or second homes.
• First-time buyers and home movers are both eligible — this is not an FTB-only scheme.
• Not available on shared ownership or shared equity purchases, or on guarantor mortgages (where someone else puts up 10% or more as security) or offset mortgages.
• If a council or other public body is paying part of your deposit, or the purchase is funded through another government-backed scheme, it isn't covered. Lifetime ISA or Help to Buy ISA savings, a Forces Help to Buy loan and First Homes are all fine.
• Recent serious credit problems rule you out: arrears equal to 3 months' payments on any loan in the last 2 years; county court judgments totalling more than £500 (unless paid within a month of the judgment, or paid off at least 3 years before completion); or an IVA or bankruptcy in force at any time in the last 3 years.
• Remortgages can be covered too, where the lender has opted in.
• Standard affordability and credit checks apply in full, and the scheme adds the exclusions above. The guarantee does not relax a single lending rule.

What it doesn't do for you

This is the part most coverage gets wrong. Freedom to Buy is a supply-side intervention: it changes which products exist on lenders' shelves, not the deal you get from them. Specifically, it does not:

• lower your interest rate — scheme products are priced like any other 95% LTV mortgage;
• increase your maximum loan — affordability is assessed on your income and outgoings exactly as normal;
• contribute anything to your deposit — the 5% must be yours (or a gifted deposit).

The practical benefit is availability and competition: more lenders offering 5%-deposit products means more chance of an approval and keener pricing than a thin market would offer. Whether your particular income supports the loan you need is a separate question — and one that varies a lot between lenders.

Worked example: buying with 5% down

Here is what a typical first-time buyer purchase looks like with the minimum deposit.

That income figure is the catch for many solo buyers: at 95% LTV it is usually income, not deposit, that ends up capping the budget. Joint applications, lenders with higher income multiples, or a slightly cheaper property all close the gap.

95% vs 90%: the cost of a small deposit

95% LTV products carry noticeably higher interest rates than 90% ones — typically the most expensive band in the market. That has two knock-on effects: your monthly payment is higher, and the stress-tested affordability calculation may cut your maximum loan, because lenders test whether you could still afford the mortgage at a rate above the one you actually pay.

There is also a structural point worth understanding: at 95% LTV you are more exposed to falling prices. If the market dips a few percent shortly after you buy, your equity can be wiped out on paper, which makes remortgaging at the end of your initial deal harder — you may find yourself on your lender's standard variable rate until prices recover or your repayments rebuild equity. None of this is a reason to avoid 5%-deposit buying, but it is a reason to buy a home you plan to stay in for several years rather than a short-term stepping stone.

This means saving even 1-2% more deposit can be disproportionately valuable: stepping from a 5% to a 10% deposit moves you into a cheaper LTV band with more lenders, better rates and often higher borrowing. If you are close to that line, it may be worth a few more months of saving — our guide to how deposit size affects borrowing runs the numbers on where the step changes fall.

Alternatives if 5% is out of reach

If even a 5% deposit is beyond reach right now, you are not out of options:

• 100% LTV mortgages — a small number of lenders offer no-deposit products, including track-record style deals that use your rent payment history as evidence. See our 100% LTV and guarantor mortgages guide.
• Guarantor and family springboard mortgages — a family member's savings or property stands as security instead of a deposit.
• Joint Borrower Sole Proprietor (JBSP) — a parent's income boosts affordability without them owning the property.
• Gifted deposits — most lenders accept a deposit gifted by close family.
• Shared ownership — buy a share with a deposit measured against the share, not the full price; see our shared ownership affordability guide.

Confirmed, not yet open: Your First Home (England). Your First Home is a new government scheme in England for first-time buyers of new-build homes from developers that sign up to it. You put down a deposit of at least 2.5%, the government lends you 20% of the price as an equity loan that is interest-free for 5 years, and a repayment mortgage covers the rest. Your household income must be £110,000 or less (£140,000 in London), and the home must be under the price cap for its area. The rules were confirmed at the Budget on 28 October 2026; applications are expected to open in February 2027, with the first sales from April 2027.

For the full menu of help available, our first-time buyer schemes guide compares every active scheme and which ones can be combined.

Frequently asked questions

Is Freedom to Buy the same as the Mortgage Guarantee Scheme?

Functionally it is the successor. The temporary Mortgage Guarantee Scheme ran from April 2021 to mid-2025; Freedom to Buy launched in July 2025 as its permanent replacement. The mechanics are similar — the government guarantees a portion of lender losses on 95% loan-to-value mortgages — but Freedom to Buy is a standing scheme rather than one with an end date.

Does Freedom to Buy give me a cheaper rate?

No. The guarantee protects the lender, not you — it does not lower your interest rate or increase what you can borrow. Its purpose is to keep 5%-deposit products widely available through the market cycle. You should compare scheme and non-scheme 95% products alike, on their overall cost and terms.

Who qualifies for Freedom to Buy?

Buyers purchasing a primary residence worth £600,000 or less with a deposit of at least 5% but less than 10% (a loan above 90% and up to 95% of the price), on a repayment (not interest-only) mortgage. It is open to first-time buyers and home movers, but not for buy-to-let or second homes. It can't be used for shared ownership or shared equity, and borrowers with recent serious credit problems (3 months' arrears in the last 2 years, CCJs over £500, or an IVA or bankruptcy in the last 3 years) are excluded. Standard lender affordability and credit checks apply in full.

Is there a property price limit?

Yes — the property must be worth £600,000 or less and be your primary residence. Above that price you would need a deposit and product outside the scheme.

Can home movers use Freedom to Buy, or is it first-time buyers only?

Home movers can use it too. Unlike some schemes, Freedom to Buy is open to both first-time buyers and existing owners moving home, as long as the property will be their primary residence and the other criteria are met.

Last updated: October 2026