Thursday, June 13, 2024
HomeBusinessLabour to Make Mortgage Guarantee Scheme Permanent for First-Time Buyers

Labour to Make Mortgage Guarantee Scheme Permanent for First-Time Buyers


Labour has announced plans to permanently extend the mortgage guarantee scheme, initially introduced by the Conservatives in 2021 under then-Chancellor Rishi Sunak, if they win the upcoming general election.

This scheme, designed to support low-deposit mortgages for first-time buyers, was recently extended until July next year by current Chancellor Jeremy Hunt.

Labour leader Sir Keir Starmer emphasised his commitment to making homeownership more accessible, stating his ambition to “turn the dream of owning a home into a reality.” The scheme involves the government acting as a guarantor for part of a home loan, encouraging lenders to offer low-deposit deals. Labour claims this initiative, branded as “Freedom to Buy,” will help over 80,000 young people onto the property ladder within the next five years.

However, the latest statistics from the Office for National Statistics reveal that in 2022, approximately 40% of the 16.5 million people aged 15 to 34 in the UK were living with their parents, equating to around 6.7 million individuals. This underscores the significant challenges many young people face in securing their own homes.

Labour argues that making the mortgage guarantee scheme permanent will prevent young people from being “locked out of homeownership” due to the tough conditions in the private rented sector and difficulties in saving for a deposit. Starmer highlighted the importance of this initiative by reflecting on his own family’s experience, saying, “My parents’ home gave them security and was a foundation for our family. As prime minister, I will turn the dream of owning a home into a reality.”

The existing scheme allows lenders to purchase a guarantee on part of mortgages, meaning the government could compensate for some losses if a bank repossesses a house. This programme aims to boost lenders’ willingness to offer high loan-to-value mortgages, thereby reducing the deposit burden on buyers.

However, mortgage brokers point out that borrowers still need to pass affordability checks to secure a mortgage, not just raise a deposit. Lenders typically require a sufficient regular income to ensure borrowers can manage mortgage repayments, meaning the scheme might serve more as a safety net rather than a widely utilised tool.

In addition to making the mortgage guarantee scheme permanent, Labour has pledged to reintroduce housing targets, fast-track planning permissions on brownfield sites, and prioritise building on “grey belt” land. These measures, Labour claims, could facilitate the construction of 1.5 million homes.

David Sturrock, a senior research economist at the Institute for Fiscal Studies, noted that declining homeownership rates since the 2000s mean young adults are now a third less likely to own a home compared to 25 years ago. He acknowledged that making the mortgage guarantee scheme permanent could help reduce barriers to homeownership but emphasised that prospective buyers also need sufficient incomes to afford mortgage repayments.

The Conservative Party, in response, has highlighted its “Family Home Tax Guarantee” which pledges not to increase the number of council tax bands, carry out a council tax revaluation, cut council tax discounts, or raise stamp duty rates.

Laura Trott, Chief Secretary to the Treasury, stated, “Only Rishi Sunak and the Conservatives have a clear plan, backed by bold action, to strengthen the economy, bring mortgage costs down and help more people get on the housing ladder.”

Meanwhile, SNP candidate for Airdrie and Shotts, Anum Qaisar, criticised Westminster’s handling of the economy, arguing that Scottish households are “being punished by Westminster failures” and highlighting the high costs of mortgages and energy bills.

The Liberal Democrats also weighed in, promising to prioritise community needs over developer interests and to promote genuinely affordable housing options for first-time buyers.





Source link

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisment -

Most Popular

Recent Comments

Verified by MonsterInsights