Labour’s ‘Freedom to Buy’ mortgage scheme faces criticism

Doubt is being cast on Labour’s proposed ‘Freedom to Buy’ mortgage guarantee scheme after an analysis of Financial Conduct Authority (FCA) data.

Wealth management firm Quilter says the scheme may not effectively support prospective first-time buyers.

Since its inception in April 2021, the current mortgage guarantee scheme has facilitated just 44,368 mortgages, with 86% (38,323) benefiting first-time buyers.

In contrast, Quilter’s analysis reveals that between 2021 and 2023, more than 1.13 million mortgages were secured by individuals aged 18-30.

‘Young people have been able secure a mortgage’

The firm’s mortgage expert, Charlotte Nixon, said: “While it is certainly a good thing that more young people have been able secure a mortgage over the past decade, it appears the number may now be falling.

“This will in part be down to the lack of support on offer for first time buyers, which has only been exacerbated by high mortgage rates, the pace of house price growth and the difficulty faced in saving a deposit.”

She adds: “Given the current economic circumstances, young people’s finances are already incredibly stretched, so saving a deposit for a first home has been made all the more challenging. “However, a high loan to value mortgage such as those that would be encouraged by Labour’s ‘Freedom to Buy’ scheme is simply not the answer.

“Such a scheme would not address the fundamental issue of high property prices relative to average incomes, which has been evidenced by the considerable lack of take up thus far.”

The number of young people securing mortgages

Quilter’s analysis highlights a steady increase in the number of young people securing mortgages over the past decade, peaking at 350,092 in 2023, up from 252,558 in 2014.

This figure has declined, however, since a 2021 spike of 401,665, attributed to the pandemic-era stamp duty holiday, marking a 13% drop in two years.

With current mortgage rates and house prices significantly higher than a decade ago, affordability challenges have intensified for first-time buyers.

Until Labour’s plans for new housing targets and planning reforms take effect, its manifesto includes a pledge to make the Conservative-introduced mortgage guarantee scheme permanent.

But the existing scheme’s limited success suggests its permanence may not provide adequate support for first-time buyers.

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