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Labour last night vowed to permanently maintain and expand the Conservative mortgage guarantee scheme, rebranding it “Freedom to Buy”.
The party estimates that the move will help 80,000 more young people get onto the home-buying ladder over the next five years. The move would make permanent the current mortgage guarantee scheme, which allows people to get a home with a low down payment, but was due to expire in June 2025.
It was also announced that if Labour wins next month’s general election, it will also undertake an overhaul of the town planning system, including the reintroduction of housing targets, with Chancellor Keir Starmer claiming the measures will lead to the building of 1.5 million more homes over the next five years.
Industry response:
Richard Donnell, executive director at Zoopla, said: “Policies to support first-time home buyers are always welcome. One of the biggest challenges first-time home buyers face is the down payment needed to finance their purchase. Since the Global Financial Crisis, there has been a decline in the availability of high LTV mortgages, mainly due to stricter mortgage regulations.
Currently, the average mortgage buyer puts down 20% of the property’s value – in London this rises to nearly 33%, or £145,000. Over the past five years, less than 1% of mortgage lending to mortgage buyers has been at an LTV above 95%, with 20% of new loans having an LTV between 90% and 95%.
According to FCA data, in 2022 there were 76,000 first-time buyer mortgages at over 90% LTV.
Mortgage guarantees allow banks to reduce the cost of a mortgage with a small down payment, and while mortgage interest rates may be lower, borrowers will need to prove they can afford a higher level of stressed loan interest than the actual interest rate, which currently averages more than 8%.
Small down payment mortgages tend to work well in lower value housing markets, where 95% loan repayments do not take up a large proportion of a buyer’s income. They are much harder to make work in the south of England, where pressures on first-time buyers’ ability to afford a home are greatest. While this is welcome news overall, the projected target will only equate to 5% of annual FTB.”
Simon Gerrard, managing director of Martin Gerrard, said: “I have long been concerned about children having no place to live, which is why I very much welcome Labour’s introduction of a policy initiative to build new homes. The targets set by planning reform and policy are ambitious, but given the shortage of housing stock available for everyone, particularly first-time homebuyers, ambition is what we need.”
“Similar policies have been announced by governments over the past 14 years but consistently no action has been taken, so it’s very encouraging to see Labour prioritising this issue.”
“It is also very encouraging that Labour has promised to help first home buyers who have been shut out of the housing market and have little chance of realising their dream home – this is having a negative impact on the housing market as a whole, which needs a healthy influx of new entrants to function properly.
“The rapid rise in property prices in the UK will only make the situation worse. The reality is that support for first-time home buyers is long overdue. It’s great to see Labour making this a priority and introducing support schemes to help first-time buyers save up for a down payment and finance their first home.”
“Labour’s proposed policy to prioritise domestic first-time buyers over overseas investors would also be a welcome change. Even in the rare cases where homebuying has been permitted under the current government, too often it does not actually offer aspiring British buyers the opportunity to get onto the home-buying ladder.”
“Underfunding local authorities has not helped by the slowing rate of housebuilding, and aligning a First for British Buyers policy with extra funding for local authorities would complement efforts to meet the ambitious housing targets set by Labour.”
David Thomas, chief executive of Barratt Developments, said: “We welcome proposals that will help more people buy their first home in tough market conditions.
“To help more people buy their first home, it’s also vital that we improve our current planning system, such as setting housing targets in local plans and recruiting more skilled planners, to enable local authorities and housebuilders to build the high-quality, energy-efficient homes the country needs.”
Adam Feather, managing director of Robert Anthony Estate Agents, added: “We welcome all measures to support property buyers, but we would like to see a scheme put in place to support all buyers, not just those buying new homes, and we hope that all political parties will debate housing further in the run up to the general election. More needs to be done to support people wanting to buy property and Labour’s proposals are a step in the right direction.”
EYE Breaking News: Labour unveils new housing policy including ‘Freedom to Buy’ scheme