New 5% deposit mortgage scheme planned

The government plans to set up a new 5% deposit mortgage scheme to fix Britain’s broken housing market.

In an online speech to the Conservative Party conference Prime Minister Boris Johnson said many young people in Britain could afford to buy their own home but were prevented from doing so because they can’t afford the deposit.

First-time buyers

As well as promising to reform planning regulations to make it easier to build new homes, he said it was time to give young first-time buyers ‘the chance to take out a long term fixed rate mortgage of up to 95% of the value of the home, vastly reducing the size of the deposit’.

He added: “We believe this policy will give two million more owner occupiers – the biggest expansion of home ownership since the 1980s.

We will help turn Generation Rent into Generation Buy.”


No detail was given of how the scheme will work other than the government will be taking some of the loan risk in the form of state guarantees. It also plans to remove the stress tests currently employed by lenders.

The Prime Minister promised to ‘build Britain back better’ to make it ‘the greatest place on earth’, saying the housing scheme would ‘give the chance of home ownership and all the joy and the pride that goes with it to millions who currently feel excluded’.


Commenting on the plans Eric Leenders of trade body UK Finance said the industry looked forward to working with government on the proposals.

He said: “The banking and finance industry supports innovation in the mortgage market, particularly that which enables borrowers to realise their dream of home ownership, through lower deposits.

We look forward to working with the government on these proposals in due course.”

But he warned: “Firms have a duty to lend responsibly and consider the affordability of the mortgage in the long term, helping customers to avoid the risks associated with negative equity.”


Financial website Moneyfacts said that the number of mortgage deals valued at 90% of the house value or more dropped by 93% between September 2019 and September 2020. Around 400 mortgage products requiring a deposit of just 5% were available at the start of the pandemic, but now only a handful remain.