Chancellor Rachel Reeves is set to unveil a permanent mortgage guarantee scheme next week, aimed at helping first-time buyers secure a footing on the housing ladder during periods of economic stress.
Reeves will announce the initiative – rebranded as Freedom to Buy – in her first Mansion House speech on Monday, fulfilling Labour’s manifesto pledge to support aspiring homeowners with small deposits.
The scheme, originally introduced by the Conservatives during the pandemic, expired last month.
The Financial Times reports that under the relaunched programme, the government will underwrite 95% loan-to-value mortgages for buyers with deposits as low as 5%, offering lenders a state-backed guarantee in the event of repossession.
CAPPED LIABILITY
Participating lenders will pay fees to the Treasury to cover the risk, with a maximum contingent liability capped at £3.2 billion – the same limit set under the previous scheme.
Emma Reynolds, City minister, said the new structure would give lenders confidence to offer high LTV mortgages throughout the economic cycle, ending the uncertainty caused by temporary programmes.
“Our new scheme will ensure those with a deposit as small as 5% can access suitable mortgage products,” she said.
While welcomed by some, the announcement drew mixed reactions from the industry.
POSITIVE STEP
Paul Broadhead of the Building Societies Association told The Financial Times that the guarantee was a positive step, but stressed it must be matched by action on housing supply.
And Pete Dockar of Generation Home, said the scheme’s real value lies in “smoothing the cycle,” keeping products available even during downturns.
But Martin Stewart of London Money dismissed it as “pointless,” arguing that risk-averse lenders will remain cautious regardless of government backing.
Reeves’ Mansion House address will also outline Isa reforms aimed at channelling more savings into stocks and shares, part of a broader package to bolster household finances.
