HM Treasury 2025 Mortgage Guarantee Scheme

As FCA eases advice and affordability rules

What’s this about?

The government has introduced a new, permanent Mortgage Guarantee Scheme aimed at incentivising the availability of 91-95% loan-to-value mortgages. The Scheme provides participating lenders with a government-backed guarantee, insuring them against a portion of their potential losses on those mortgages. At the same time, the FCA has published its policy statement, changing MCOB to remove the “interactive dialogue” advice trigger from execution-only mortgages and ease the affordability rules for mortgage term reductions and remortgages.

Our Head of Mortgage Regulation, Richard Clark says...

“This package of measures has been welcomed by mortgage lenders as way of helping people who finding it challenging to get onto the housing ladder or to remortgage without having to engage and pay for an advisor.”

Eligibility requirements for the scheme

The lender must be a registered participant with H.M. Treasury and part of the registered lender’s group
The loan must be in Sterling and must be a repayment mortgage (not interest-only)
The loan must either be a new loan or a remortgage loan concerned with residential property occupied by the borrower (no buy-to-let)
The mortgage must be first ranking and the property must be owned solely by the borrowers (no co-ownership or shared equity)
The Loan to Value must be between 90 - 95%
Affordability criteria must still be met
The loan must not be a guarantor mortgage or offset mortgage

This scheme is amongst the first of a series of “quick wins” for the FCA under its programme of mortgage reforms. The other immediate measures concern the roll-back of the “interactive dialogue” advice trigger for execution-only mortgages, and the relaxation of affordability assessments for reduction of mortgage terms, and for remortgage customers where the new mortgage is more affordable than the existing one, which changes were announced in the FCA’s Policy Statement PS25/11 on 22 July.

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