Everything we know so far about Labour’s Freedom to Buy mortgage scheme

During their General Election campaign, Labour pledged a new mortgage scheme to help buyers who struggle to save large deposits.

Now that they are officially in charge, we've rounded up what we know so far about the scheme.

We’ll continue to update this page as more information is made available.

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Last updated on 10 July 2024 by Claire Flynn

What is the Freedom to Buy mortgage scheme? 

While there aren’t many details confirmed, Labour’s article about the Freedom to Buy scheme states that its intention is to help working people who struggle to save for a large deposit. 

The article states: “The Tories are planning to axe the current mortgage guarantee scheme in June 2025 – denying 65,000 young people the opportunity to own their own home. In contrast, Labour will introduce a permanent, mortgage guarantee scheme, helping prospective homeowners who struggle to save for a large deposit.”

The above implies that the scheme will be similar in nature to the current mortgage guarantee scheme, but it will be permanent.

Find out more about different home ownership schemes in the UK.

How will the Freedom to Buy mortgage scheme work?

If the scheme works in the same way as the existing guarantee scheme, then the government will “guarantee” a portion of a mortgage loan. The aim is to encourage lenders to offer high loan-to-value (LTV) mortgage deals by removing some of the risk from them. 

Labour has stated that they’ll “work with lenders and the property industry to increase uptake of the scheme and ensure they confidently offer it to prospective buyers.” 

Of course, they may alter how the scheme works compared to how it currently does, but there haven’t been any details of that confirmed yet. 

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Is Freedom to Buy just for first-time buyers? 

In their article on the scheme, Labour initially refers to the scheme as a way to support first-time buyers and young people. But later they say the intention is to support workers who may struggle to save a large deposit.

This means that the products offered with the support of this scheme could be made available to both first-time buyers and home movers. This is the case with the existing mortgage guarantee scheme. However, as few details have been confirmed on the Freedom to Buy scheme, we can’t say for sure at present.

The scheme is probably most likely to benefit first-time buyers. They can’t rely on the equity in an existing property to boost their deposit, so high LTV products may appeal more to them compared to those who already own a home.

Will the Freedom to Buy scheme help first-time buyers?

Saving for a deposit can be a real barrier to home ownership for many. This guarantee scheme may encourage lenders to continue offering higher LTV mortgages, and others to start. Which could be of real benefit to those who can only afford to buy with a smaller deposit. 

But higher LTV mortgages also come with an increased risk of negative equity and greater interest rate costs. So, buyers should consider carefully if it’s the right option for them. 

Another key barrier to home ownership is loan to income limits - most lenders cap borrowing amounts at 4.5 times the annual income. For those buying in pricier areas or buying on their own, higher LTV mortgages may not help them with this problem.

Use our mortgage calculator to get an idea of how much you can borrow.

What our expert had to say

John Fraser-Tucker, Head of Mortgages at Mojo, said: John said, “Whilst a similar scheme is currently in place until June 2025, Labour has pledged to make the ‘Freedom to Buy’ scheme permanent.

"The scheme encourages mortgage lenders to accept a lower deposit as the government offers to step in should the first-time buyer struggle to pay. The government will step in and repay an element of what the mortgage lender would lose if the property was repossessed.  

“For some, this might be their only path onto the property ladder. However, it's not without risks. With a substantially smaller deposit, buyers may face higher mortgage rates, leading to larger monthly payments and potentially thousands more in interest over time.

"While this scheme offers a valuable opportunity, it's important to weigh the long-term costs against the immediate benefit of homeownership."

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