Chancellor Rachel Reeves is expected to unveil the government’s much-anticipated Freedom to Buy mortgage scheme today – though concerns are already being raised over its effectiveness.
Reeves is due to announce the initiative during her Mansion House speech, positioning it as a rebranded successor to the existing Mortgage Guarantee Scheme.
The permanent government-backed mortgage guarantee scheme, a manifesto commitment of the Labour party, will allow lenders to offer mortgages at 95% loan-to-value (LTV), backed by government guarantees in case of repossession, with a view supporting first-time buyers onto the property ladder.
It is understood that the guarantee ceiling is £3.2bn in contingent liability, with fees paid by lenders intended to offset taxpayer risk.
Paula Higgins, chief executive, HomeOwners Alliance, said: “There’s not too much to get excited about here. The Mortgage Guarantee Scheme was originally launched to encourage lenders to offer 95% mortgages but lenders no longer need that nudge. Earlier this year, the number of 95% LTV mortgage deals hit nearly 400, the highest level in almost five years.
“Since the scheme operates entirely behind the scenes between lenders and government, we don’t expect first-time buyers will notice any difference. This feels more like a political gesture than a practical solution to the housing crisis.
“The issue is not the unavailability of 95% loan to value mortgages. The issue is that an increasing number of buyers do not have a big enough deposit [with a 4.5x loan-to-income loan]. In order to help first-time buyers the government is going need a bigger policy, in our view.”
“The issue is not the unavailability of 95% loan to value mortgages. The issue is that an increasing number of buyers do not have a big enough deposit [with a 4.5x loan-to-income loan]. In order to help first-time buyers the government is going need a bigger policy, in our view.”
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