Labor has announced plans to permanently extend the mortgage guarantee scheme, initially introduced by the Conservatives in 2021 under then-Chancellor Rishi Sunak, if they win the next general election.
The scheme, designed to support low-deposit mortgages for first-time buyers, was recently extended until July next year by current chancellor Jeremy Hunt.
Labor leader Sir Keir Starmer reiterated his commitment to making home ownership more accessible, outlining his ambition to “turn the dream of owning a home into reality”. The scheme includes the government acting as a guarantor for part of the housing loan, and encouraging lenders to offer low-deposit deals. Labor claims the initiative, called Freedom to Buy, will help more than 80,000 young people get onto the property ladder over the next five years.
However, the latest statistics from the Office for National Statistics reveal that in 2022, almost 40% of the 16.5 million people aged 15-34 in the UK were living with their parents, equating to around 6.7 million individuals. This highlights the significant challenges many young people face in securing their homes.
Labor says making the mortgage guarantee scheme permanent will prevent young people from being “disenfranchised from home ownership” by difficult conditions in the private rented sector and difficulties in saving for a deposit. Starmer highlighted the importance of this initiative by reflecting on his own family's experience, saying: “My parents' home gave them security and was the foundation of our family. As Prime Minister, I will make the dream of owning a home a reality.”
The current system allows lenders to buy security on a portion of mortgages, meaning the government can offset some losses if a bank repossesses a home. This program aims to enhance the willingness of lenders to provide high-value real estate loans for the loan, thus reducing the burden of deposits on buyers.
However, mortgage brokers point out that borrowers still need to pass affordability checks to secure a mortgage, not just collect a deposit. Lenders typically need enough regular income to ensure borrowers can manage their mortgage repayments, meaning the scheme may be more of a safety net than a widely used tool.
As well as making the mortgage guarantee scheme permanent, Labor pledged to reintroduce housing targets, fast-track planning permissions for ready sites, and prioritize building on “gray belt” land. Labor claims these measures could facilitate the construction of 1.5 million homes.
David Sturrock, chief research economist at the Institute for Fiscal Studies, noted that the decline in home ownership rates since the 2000s means that young adults are now a third less likely to own a home than they were 25 years ago. He acknowledged that making the mortgage guarantee scheme permanent could help reduce barriers to homeownership, but emphasized that potential buyers also need sufficient income to make their mortgage payments.
In response, the Tories have highlighted a “Family Home Tax Guarantee” which pledges not to increase the number of council tax bands, introduce a council tax revaluation, reduce council tax cuts, or raise stamp duty rates.
Laura Trott, chief secretary to the Treasury, said: “Only Rishi Sunak and the Conservatives have a clear plan, backed by bold action, to boost the economy, reduce mortgage costs and help more people onto the housing ladder.”
Meanwhile, SNP candidate for Airdrie and Shotts, Anum Caesar, criticized Westminster's handling of the economy, claiming Scottish families were being “penalized for Westminster's failures” and highlighting the high costs of mortgages and energy bills.
Liberal Democrats also weighed in, promising to prioritize community needs over developers' interests and promote affordable housing options for first-time buyers.