Labour’s Freedom to Buy mortgage guarantee scheme

Labour’s Freedom to Buy mortgage guarantee scheme: what it is and how it works

If you’re trying to buy a home but a deposit is the sticking point, Labour’s Freedom to Buy mortgage guarantee scheme is designed to help. It’s a government-backed mortgage guarantee intended to encourage lenders to offer higher loan-to-value (LTV) mortgages—particularly for people who have saved less than the traditional deposit.

This guide explains the scheme in plain English, including the key limits (where applicable), what the guarantee means in practice, and the main pros and cons to consider.

What is the Freedom to Buy mortgage guarantee scheme?

Freedom to Buy is a mortgage guarantee scheme where the government provides a backstop to lenders. The aim is to make it easier for eligible borrowers to access mortgages with a smaller deposit, typically in the 5% to 9% range.

In broad terms, it builds on earlier mortgage guarantee approaches by using a similar principle: lenders may be more willing to offer high-LTV lending when there is a government guarantee covering part of the risk.

How the government mortgage guarantee works (behind the scenes)

You generally won’t apply to the government for Freedom to Buy. Instead, the scheme operates through participating lenders.

Here’s the practical idea:

• A lender offers a mortgage product that may be supported by the guarantee.
• The lender purchases a guarantee that can cover losses in certain default scenarios.
• If a borrower defaults, the government guarantee can cover part of the lender’s losses—helping reduce the lender’s risk exposure.

Typical structure of the guarantee

The guarantee is commonly described as covering a portion of the mortgage where the loan is high LTV—often in the range of 80% to 95% of the property value. Exact mechanics can vary by product.

Key limits and typical eligibility boundaries

Freedom to Buy is designed for owner-occupiers with smaller deposits. The scheme is commonly described with the following boundaries (which can vary by product and lender):

• Deposit range: typically 5% to 9%
• LTV range: typically 91% to 95% LTV
• Property type/use: usually limited to a primary residence (not buy-to-let or second homes)
• Property value cap: commonly referenced as up to £600,000
• Who can use it: commonly aimed at first-time buyers, home movers, and in some cases remortgagers of their main home

It’s also important to note that not every 95% mortgage will be supported by the guarantee—lenders must offer products that are specifically backed by the scheme.

Who Freedom to Buy is for

Freedom to Buy is most relevant if you:

• have saved a smaller deposit and are looking at high-LTV mortgage options
• want to buy a main residence within the scheme’s property value boundaries
• are a first-time buyer or home mover who needs a deposit-efficient route to home ownership
• are considering a remortgage of your main home and may be able to access a supported high-LTV product (where available)

It may be less suitable if you’re:

• buying an investment property or a second home
• purchasing a property above the stated value cap
• able to access a lower-LTV mortgage without stretching affordability significantly

Why the scheme exists (and why it matters)

In the UK, one of the biggest barriers to buying is often deposit size rather than mortgage affordability alone. When deposits are harder to save, lenders may also become more cautious with high-LTV lending.

A government guarantee is intended to:

• support access to higher-LTV mortgages when deposit barriers are high
• encourage lenders to keep offering certain high-LTV products
• help maintain market availability for buyers who would otherwise be priced out of deposit-efficient options

Benefits of Freedom to Buy

1) A lower deposit hurdle

The most obvious advantage is the potential to access a mortgage with a smaller deposit—often in the 5% to 9% range.

2) More routes into home ownership

For some buyers, a supported high-LTV mortgage can be the difference between renting and buying, or between waiting longer and moving sooner.

3) Potentially wider lender participation

Because the guarantee reduces lender risk, it may help sustain the availability of certain high-LTV products.

Trade-offs and what to watch out for

Freedom to Buy can be helpful, but it’s not a free pass. Like any high-LTV borrowing, there are trade-offs.

Higher borrowing cost is common

High-LTV mortgages often come with higher interest rates than lower-LTV alternatives. That can increase monthly payments and the overall cost of borrowing.

Affordability still matters

Even with a guarantee, lenders will still assess your income, outgoings, credit history, and affordability. The scheme doesn’t remove the need to demonstrate that repayments are manageable.

More exposure if property values fall

With a smaller deposit, you may have less equity at the start. If property values decline, this can increase the risk of being in negative equity for longer.

How Freedom to Buy fits into the home-buying process

The steps you take as a borrower are usually familiar—what changes is the type of mortgage product you’re aiming for.

A typical journey looks like this:

1. Plan your deposit: confirm you’re within the scheme’s deposit/LTV boundaries.
2. Get mortgage guidance: discuss which lenders offer products that are supported by the guarantee.
3. Apply for the mortgage: your lender will run affordability and eligibility checks as normal.
4. Complete the purchase: once you have an offer and complete, you repay the mortgage over the agreed term.

How to apply (without applying to the government)

Freedom to Buy is administered through participating lenders, so the practical approach is:

• work with a mortgage adviser or lender to identify high-LTV mortgage products that are supported by the scheme
• confirm the product meets the scheme’s deposit, LTV, and property-use/value boundaries
• proceed through the lender’s standard application and underwriting process

There’s generally no separate application to the government for the guarantee.

Other low-deposit options to compare

Freedom to Buy is one route into a smaller-deposit mortgage, but it’s not the only one.

95% mortgages may be available without the scheme

Some lenders offer high-LTV mortgages outside of the guarantee. Comparing the overall cost, rate, and fees can help you understand whether the scheme-backed option is the better fit.

Very high-LTV lending exists, but it’s not the same as a guarantee scheme

Some lenders may offer very high-LTV options in specific circumstances. These products can be more restrictive and often come with higher costs.

Government incentives may also be relevant

Depending on your circumstances, other support such as Shared Ownership, First Homes, or Lifetime ISA planning may affect the deposit you need and the mortgage you choose.

Summary: is Freedom to Buy right for you?

Freedom to Buy can be a strong option if you:

• have a smaller deposit and want to access a 91% to 95% LTV mortgage
• are buying or remortgaging your main residence within the scheme’s boundaries
• want a deposit-efficient route while still meeting affordability checks

It may be less suitable if you can comfortably access a lower-LTV mortgage, or if the higher cost of borrowing would stretch your budget.

If you’re considering a high-LTV mortgage, the key is to look beyond the deposit headline and compare the total repayment cost, rate type (fixed/variable), fees, and long-term affordability.

Further information (authoritative)

• GOV.UK: mortgage guarantee scheme information (search for the latest “mortgage guarantee scheme” and “Freedom to Buy” publications on GOV.UK)
• MoneyHelper: guidance on mortgages and deposit options (MoneyHelper website)