Chancellor Rachel Reeves has confirmed the launch of Freedom to Buy, a permanent mortgage guarantee scheme aimed at helping people buy homes with 5% deposits.
“We must restore the dream of homeownership for working people,” Reeves said ahead of her Mansion House speech, framing the policy as part of Labour’s broader plan to improve financial security.
But with high mortgage rates and house prices outpacing wages, experts are divided on whether the move will make a real difference.
A lifeline for some buyers
The scheme helps buyers secure 95% mortgages by having the government share lender risk(Image credit: Getty Images)
The scheme, first introduced temporarily by the Conservatives in 2021, enables buyers to take out 95% loan-to-value (LTV) mortgages with the government covering part of the risk.
Lenders pay a fee to the Treasury in exchange for the guarantee, which is meant to give them the confidence to continue offering high-LTV products even during downturns.
Some lenders and housing bodies welcomed the move, suggesting it could prevent the sharp withdrawal of low-deposit products in tough economic periods and smooth out access over the long-term.
Expert concerns about affordability and impact
Despite the policy’s intentions, many mortgage experts and brokers remain skeptical about its effectiveness.
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“Every lender who wanted to offer a 95% loan is probably already doing so,” said Peter Stimson, director at MPowered Mortgages, adding that the scheme may shift risk but won’t lower costs when buying a house.
Critics, including mortgage brokers like Martin Stewart of London Money argue that the scheme addresses access to credit but not the core affordability issue – with rising house prices, high monthly payments, and a shortage of new homes continuing to lock out many buyers.
Is the missing piece housing supply?
While the scheme may help with high mortgage rates, analysts warn that it won’t meaningfully change the market unless paired with a broader strategy to increase housing supply.
The Building Societies Association and other industry voices have urged the government to follow through on its pledges to accelerate housebuilding and reform planning rules.
Without more homes being built, experts suggest Freedom to Buy could inflate demand without solving the structural shortage – keeping ownership out of reach for many.
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