What is labour’s freedom to buy scheme?
THE LABOUR PARTY’S FREEDOM TO BUY SCHEME emerged as a key proposal during the 2024 general election campaign aimed at gaining the support of potential first-time homebuyers. Sir Keir Starmer’s ‘Change’ manifesto outlined several ambitious reforms, including modifying the planning system and reinstating the 300,000-a-year housebuilding target. Among these initiatives was the Freedom to Buy scheme, designed to enable 80,000 young individuals to climb the housing ladder.
AIMING FOR HOMEOWNERSHIP While the Freedom to Buy scheme wasn’t featured in the King’s Speech, anticipation surrounds its potential enactment. Chancellor Rachel Reeves is preparing to deliver Labour’s first budget speech since 2010, hinting at possible tax increases due to unexpected public finance challenges. This context underscores the significance of the Freedom to Buy scheme as part of Labour’s broader strategy to support young homebuyers and address housing affordability.
OVERCOMING THE BARRIERS TO HOMEOWNERSHIP In essence, the Freedom to Buy scheme is a variant of the Mortgage Guarantee Scheme introduced by the Conservative government in April 2021. Its primary goal is to assist young people in overcoming the barriers to homeownership exacerbated by rising house prices. Acting as a guarantor, the government aims to encourage lenders to offer high loanto-value (LTV) mortgages, allowing buyers to secure homes with a smaller deposit.
KEY DIFFERENCES FROM THE MORTGAGE GUARANTEE SCHEME Freedom to Buy is a permanent solution, unlike the temporary Mortgage Guarantee Scheme. The existing scheme allows lenders to purchase government guarantees for high-risk loans, covering up to 80% of the property value in case of default. However, its temporary nature has limited the number of 95% mortgages available, as lenders hesitate to integrate them fully into their offerings.
BOOSTING THE LOW-DEPOSIT MORTGAGE MARKET The Labour Party’s plan involves a rebranding effort to establish Freedom to Buy as a permanent fixture in the mortgage market. The government hopes to incentivise lenders to include high-LTV mortgages in their product ranges and enhance awareness among prospective buyers. Labour aims to emulate the successes in countries like Australia and Canada, where similar schemes have facilitated greater homeownership.
ELIGIBILITY AND POTENTIAL IMPACT Details about eligibility for the Freedom to Buy scheme remain sparse, though initial indications suggest a focus on first-time buyers. The current Mortgage Guarantee Scheme is open to both existing homeowners and first-time buyers, but Labour’s approach may narrow this scope. By concentrating efforts on newcomers to the market, the scheme aims to address the specific challenges they face