The industry is sceptical about the effectiveness of Labour’s nw ‘Freedom To Buy’ initiative, which effectively makes the current mortgage guarantee a permanent part of the lending landscape.
This would be a permanent mortgage guarantee scheme, with the state acting as guarantor for prospective homeowners who struggle to save for a large deposit. Analysts such as Richard Donnell at Zoopla suggests that this would help at best some 5% of first time buyers, chiefly those in areas with lower priced housing.
The news agency Newspage canvassed industry opinion – with mixed views.
Andrew Montlake, Managing Director at Coreco says: ”This is a promising first offering from Labour … This can allow lenders to take a longer term approach in their offerings and ensure that competitive products are continually available for those with lower deposits. Whilst it doesn’t solve the long term housing issues overnight, Labour have at least shown they understand them and have already shown they are willing to speak and engage with those on the front lines, which is more promising for the housing market as a whole should the next government be a red one.”
Lewis Shaw, Owner at Shaw Financial Services, comments: “This policy is about as useful as a chocolate teapot. Prior to the pandemic, 95 per cent loan-to-value mortgage lending was the norm. It happened without any political interference or putting the taxpayer on the hook. Has everyone forgotten that? If this is the extent of their ingenuity to get people on the housing ladder then god help first-time buyers. If Labour really wants to help young people buy a home, then do the things that we all know are needed: Tax the super-rich, reduce wealth inequality and build more houses. It’s not rocket science.”
And Katy Eatenton, Mortgage & Protection Specialist at Lifetime Wealth Management, appears to be similarly critical. She says: “Yet another scheme with no real substance. The existing mortgage guarantee offering has had limited take-up and this will be no different. We need to be building properties that first-time buyers can actually buy. Unless this happens and the properties are priced correctly, not with a built in premium that leaves them in a negative position when it is time to remortgage, none of these minimal deposit schemes are fit for purpose.”
Justin Moy, Managing Director at EHF Mortgages sees it this way: “Freedom to Buy looks great on the first read, but then you realise it’s actually been in place since 2021 and many lenders don’t use it anyway. Labour are effectively promoting something that already exists and isn’t used. There’s less smoke and mirrors on the Paul Daniels show.”
And Stephen Perkins, Managing Director at Yellow Brick Mortgages, piles on the criticism. He states: “Like most of Labour’s policies, this seems to lack any real substance. The Mortgage Guarantee scheme has become almost obsolete with standard 5% deposit mortgages available, and even 1% deposit options on other schemes from lenders. House building targets are great in theory, but not if developers are not building truly affordable homes. It is pointless to have “first dibs” on properties that remain unaffordable to most first-time buyers. This policy will not hugely impact the property market and, I dare say, won’t inspire much change in votes either.”