Labour will pledge to get more young people on the housing ladder when it announces its freedom to buy scheme today.
The move will see lenders offer mortgages with a 5% deposit, with the government acting as guarantor for part of a home loan, if Labour wins the 4 July general election.
It makes permanent the Conservative government’s mortgage guarantee scheme introduced in 2021, which was extended until July next year by Chancellor Jeremy Hunt.
Labour says the plan will help over 80,000 young people get onto the property ladder over the next five years.
Labour leader Sir Keir Starmer is expected to say: “After 14 years of Conservative government, the dream of home ownership is out of reach for too many hard-working people.
“Despite doing everything right, they can’t move on and up. A generation faces becoming renters for life.”
The Association of Mortgage Intermediaries chief executive Robert Sinclair adds: “First-time buyers are the essential foundation to an effective housing market.
“They give builders confidence to bring new sites to market and allows first movers to energise the transaction journey.
“Delivering a permanent support facility, will give the whole market confidence and avoid the start/stop nature of previous initiatives.
“By combining government support with lender assessments, the mortgage adviser community will be able to ensure as many working people as possible can benefit from this scheme.”
But Quilter mortgage expert Karen Noye points out: “The well-meaning [mortgage guarantee] scheme introduced by the Tories, has so far been only marginally impactful.
“Generally, FTBs can only borrow up to 4.5 times their annual income, meaning those on average salaries can only secure mortgages slightly over £150,000, which doesn’t offer much choice in the current market. Often saving for a larger deposit or receiving financial help from family provides more options.
“Additionally, high loan-to-value ratios increases the risk of negative equity, especially if house prices fall. This could leave new homeowners in a difficult position if they need to sell their property, as they would have to cover the negative equity, moving costs, and a new deposit.
“Regardless of Labour’s announcements, high mortgage rates continue to be a significant hurdle for lots of people.”
The lender says prices were “largely static” after edging down by 0.1% from April. But in the year to May, prices rose by 1.5%.
