Labour has announced a policy to make the mortgage guarantee scheme permanent, aiding first-time buyers.
- The scheme supports low-deposit mortgages and was recently extended by Chancellor Jeremy Hunt.
- Labour claims their ‘Freedom to Buy’ initiative will help over 80,000 young people onto the housing ladder.
- Statistics show 40% of young people aged 15 to 34 live with their parents, highlighting the need for assistance.
- Labour plans to reintroduce housing targets, fast-track planning on brownfield sites, and prioritise ‘grey belt’ land.
Labour has pledged to permanently implement the mortgage guarantee scheme, a programme designed to aid first-time buyers by supporting low-deposit mortgages. This scheme, recently extended until July next year by current Chancellor Jeremy Hunt, aims to make homeownership more accessible.
Sir Keir Starmer, Labour leader, emphasised his commitment to homeownership, stating his ambition to ‘turn the dream of owning a home into a reality.’ The scheme involves the government acting as a guarantor for a portion of a home loan, encouraging lenders to offer low-deposit deals.
Labour claims their initiative, branded as ‘Freedom to Buy,’ will assist over 80,000 young people onto the property ladder within the next five years. This claim comes as the Office for National Statistics reveals that, in 2022, approximately 40% of the 16.5 million individuals aged 15 to 34 in the UK were living with their parents, equating to around 6.7 million people.
The scheme primarily aims to prevent young people from being ‘locked out of homeownership’ due to the challenging conditions in the private rented sector and the difficulties encountered in saving for a deposit. Starmer highlighted the personal significance of this initiative by referencing his family’s experience, stating, ‘My parents’ home gave them security and was a foundation for our family. As prime minister, I will turn the dream of owning a home into a reality.’
The existing scheme allows lenders to obtain a guarantee on part of the mortgage, meaning the government may cover some losses if a bank repossesses a property. This mechanism is intended to boost lenders’ confidence in offering high loan-to-value mortgages, thus reducing the deposit burden on buyers.
However, mortgage brokers caution that prospective borrowers must still pass affordability checks to obtain a mortgage, not merely save for a deposit. This essential check ensures that borrowers have a sufficient regular income to manage their mortgage repayments, suggesting that the scheme may serve more as a safety net rather than a widely utilised tool.
Beyond making the mortgage guarantee scheme permanent, Labour has also pledged to reintroduce housing targets, accelerate planning permissions on brownfield sites, and prioritise development on ‘grey belt’ land. Labour asserts that these measures could facilitate the construction of 1.5 million homes.
David Sturrock, a senior research economist at the Institute for Fiscal Studies, noted that declining homeownership rates since the 2000s mean young adults are now a third less likely to own a home compared to 25 years ago. He acknowledged that making the mortgage guarantee scheme permanent could help reduce barriers to homeownership but emphasised that prospective buyers also need sufficient incomes to afford mortgage repayments.
The Conservative Party has highlighted its ‘Family Home Tax Guarantee,’ focusing on not increasing council tax bands, avoiding council tax revaluations, maintaining council tax discounts, and keeping stamp duty rates unchanged. Laura Trott, Chief Secretary to the Treasury, remarked, ‘Only Rishi Sunak and the Conservatives have a clear plan, backed by bold action, to strengthen the economy, bring mortgage costs down and help more people get on the housing ladder.’
Conversely, SNP candidate for Airdrie and Shotts, Anum Qaisar, criticised Westminster’s handling of the economy, contending that Scottish households are ‘being punished by Westminster failures,’ which has led to high mortgage and energy costs. The Liberal Democrats also contributed to the discussion, promising to prioritise community needs over developer interests and to promote genuinely affordable housing options for first-time buyers.
Labour’s initiative to make the mortgage guarantee scheme permanent aims to address the challenges young people face in achieving homeownership.
