Chancellor Rachel Reeves is expected to confirm the relaunch of a mortgage guarantee scheme for first-time buyers.
A new permanent version, called the ‘Freedom to Buy’, will be unveiled in a speech by Reeves next week despite warnings it won’t make a big difference, the Financial Times reports.
Experts had said also that there was a low take up of the previous scheme after it was set up in 2021 under the previous Conservative government.
Freedom to Buy will be aimed at FTBs who can only afford a deposit of 5%.
10,000 more
Meanwhile, the Bank of England’s Financial Policy Committee (FPC) has discussed loosening the limits of LTV (Loan to Value). This move would allow lenders to issue high LTV mortgages to more than 15% of their customers.
The FPC has recommended the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) amend the restrictions, The Standard reports.
And Nationwide said this could mean it lend to 10,000 more FTBs.
Extremely challenging
Dame Debbie Crosbie, CEO at Nationwide, says: “This is good news for first-time buyers and is also a boost to the UK’s housebuilding ambition and the wider economy.
“We have long argued that relaxing this regulatory restriction will provide confidence to both lenders and housebuilders without materially increasing risks,” she says.
“It will help people who struggle to get on the property ladder because high rents and living costs have made saving for a deposit and meeting mortgage affordability tests extremely challenging.”
Industry reaction
Guy Gittins, CEO at Foxtons, says: “Government support for first-time buyers is always welcome – but more needs to be done.
“The end of the stamp duty holiday has shown that high stamp duty rates are a barrier for anyone trying to get on, or move up, or even downsize on the property ladder. We urge the government to rethink current stamp duty thresholds.”
Anthony Codling, MD Equity Research at RBC Markets, says: “It is helpful [a mortgage guarantee scheme], but history suggests that this is no housing demand silver bullet and will not move the needle in the housing stack.
“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”.