Chancellor Rachel Reeves will confirm next week that the government is to make permanent a scheme aimed at supporting first-time buyers with small deposits.
As reported by the Financial Times, the initiative — to be renamed Freedom to Buy — will be announced in Reeves’ Mansion House speech on 15 July, alongside wider fiscal measures intended to reassure households amid ongoing affordability pressures.
The original mortgage guarantee scheme was introduced by the Conservative government in April 2021 during the Covid pandemic, with the intention that it would be a temporary response to restricted mortgage availability. That scheme expired at the end of June.
Labour’s version will differ by becoming a standing feature of the mortgage market, allowing borrowers with deposits as low as 5% to access high loan-to-value products even during economic downturns.
Lenders participating in the scheme will pay a fee to the Treasury in exchange for government guarantees covering part of the risk on 95% loan-to-value mortgages, should repossession occur.
The Treasury has capped its maximum contingent liability under the scheme at £3.2bn — the same limit applied under the previous administration — and has assessed the risk to taxpayers as low.
Emma Reynolds, city minister, said in a recent letter to Sir Geoffrey Clifton-Brown, chair of the House of Commons public accounts committee: “Our new scheme will ensure those with a deposit as small as 5% can access suitable mortgage products.”
She added that making the scheme permanent would provide the market with greater predictability and help maintain the availability of high LTV mortgages across the economic cycle.
