Property industry reacts to Labour’s planned ‘Freedom to Buy’ scheme

Sir Kier Starmer

The Labour Party last night vowed to permanently sustain and expand the Conservatives’ mortgage guarantee scheme, rebranding it ‘Freedom to Buy’.

The party estimates that the policy would help 80,000 more young people onto the housing ladder over the next five years. It would make permanent the current mortgage guarantee scheme, which helps people get a mortgage with low deposits but had been due to expire in June 2025.

It was also announced that Labour would also commit to an overhaul of the planning system if it wins next month’s general election, including reintroducing housing targets, with Sir Kier Starmer claiming his measures will see 1.5 million more homes built over the next five years.

Industry reactions:

Richard Donnell, executive director at Zoopla, commented: “Policies to support people to buy their first home are always welcome. One of the greatest challenges facing first-time buyers is the deposit needed to fund a purchase. The use of high loan-to-value mortgages has fallen since the global financial crisis largely due to tougher mortgage regulations.

Today, the average FTB is putting down 20% of the value of the property as a deposit. In London, this goes up to almost 33%, or £145,000. Over the last 5 years, less than 1% of mortgage lending to FTBs has been over 95% LTV with 20% of new loans between 90% and 95% LTV.

FCA data shows that in 2022 there were 76,000 first-time buyer mortgages over 90% loan to value.

The use of a mortgage guarantee means banks can reduce the cost of the mortgage with a small deposit. While the mortgage rate may be lower, these borrowers will still need to prove they can pay a stressed mortgage rate at a higher level than the actual rate they will pay, which currently averages over 8%.

Small deposit mortgages tend to work in lower-value housing markets where the repayments on a 95% loan don’t account for a high proportion of the buyer’s income. They are much harder to make work in southern England where the affordability pressures on first-time buyers are greatest. Overall it’s welcome news but the projected target will only account for 5% of FTBs a year.”

Simon Gerrard, managing Director of Martyn Gerrard, said: “I have long been raising concerns that our children will have nowhere to live, and so it is very welcome to see the Labour party introducing policy initiatives to build new homes. The planning reforms and targets that the policy has set are ambitious, but ambition is what we need given the dearth of housing stock available to everybody, and especially first-time buyers.

“We have heard similar policies from the government over the past 14 years, but these have consistently lacked any action, so it is hugely encouraging to see Labour prioritising this issue.”

It is also hugely encouraging to see Labour pledging to help first-time buyers, who have found themselves impossibly locked out of the housing market, and with virtually no hope of ever fulfilling their dream of homeownership. This has been at the detriment to the entire housing market, which needs a healthy inflow of new entrants to the market to function properly.

“The sharply increasing prices of property in the UK will only make this situation worse, and in reality, help for first-time buyers was needed long ago. It is fantastic to see Labour treating this issue as a priority by introducing support schemes to help first-time buyers save for a deposit and finance buying their first home.”

“The Labour party’s proposed policy to offer priority treatment to domestic first-time buyers over international investors is also a welcome change. Even on the rare occasions where housing has been permitted under the current government’s regime, all too often these have not actually provided opportunities for aspiring UK buyers to get onto the housing ladder.

“The lack of funding for councils has not helped the declining rates of housebuilding, and so dovetailing policy to prioritise UK buyers with providing additional funding for councils will supplement efforts to reach the ambitious housing targets that the Labour party has set.”

Barratt Developments chief executive David Thomas said: “We welcome proposals that could help more people buy their first home in a challenging market.

“In order to support more people to buy their first home, it is also important that we improve the current planning system, which includes setting housing targets in local plans and recruiting more skilled planners, so local authorities and housebuilders can build the much-needed, high-quality and energy-efficient homes the country needs.”

EYE NEWSFLASH: Labour unveils new housing policy with ‘Freedom to Buy’ scheme

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