Chancellor Rachel Reeves has launched Freedom to Buy, a mortgage guarantee scheme allowing homebuyers to purchase homes with only 5% deposits. The initiative, framed as part of Labour's plan to improve financial security, is aimed at restoring homeownership for working people. However, despite some lender support, experts question its effectiveness in the current market circumstances, citing that it does not address affordability due to high housing prices and mortgage rates. Analysts emphasize that enhancing housing supply is crucial for the initiative to have a meaningful impact on the market.
"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.
Labour's Freedom to Buy scheme aims to enable homeownership with 5% deposits, framed as part of a broader plan for financial security.
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.
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