Industry figures say Reeves' permanent mortgage guarantee scheme offers support—but warn affordability challenges run deeper
Chancellor Rachel Reeves’ decision to make the government’s mortgage guarantee scheme permanent has drawn cautious support from mortgage industry figures, who say the move could give lenders greater confidence to support first-time buyers—but falls short of addressing the scale of the affordability crisis.
The new Freedom to Buy initiative, to be formally announced in Reeves’ Mansion House speech, will offer long-term backing for 95% loan-to-value mortgages, aimed at borrowers struggling to save for a deposit. The scheme provides lenders with a government guarantee against losses in the event of repossession and is intended to replace the current stop-start model with permanent availability.
“There’s a real place in the market for something like this,” said Adrian Anderson of broker Anderson Harris. “House prices are still high compared to income multiples, and rental yields are high, which makes it hard for first-time buyers to save a deposit. This will hopefully help more get on the property ladder.”
Anderson noted that high loan-to-income (LTI) borrowing is already a necessity for many first-time buyers. “A large amount of the mortgages we write are five or five and a half times income,” he said. “Affordability is still an issue because of high mortgage rates and the cost of living, but the availability of high LTIs is important. I think this is generally good news for consumers and for the market.”
LTI cap easing met with muted enthusiasm
The Bank of England’s decision to ease implementation of the loan-to-income cap—allowing lenders more flexibility so long as the overall market-wide limit of 15% is maintained—has been seen as a modest improvement rather than a breakthrough.
Aaron Strutt of Trinity Financial said the Freedom to Buy scheme itself was unlikely to transform the market. “There’s not a huge amount of excitement,” he said. “When the scheme was first launched, there weren’t many 5% deposit mortgages available, but now most lenders offer them. It’s opened up this part of the market already.”
He questioned whether the latest announcements would have much real-world impact. “A reduction in stamp duty would have been more useful to help first-time buyers and those with smaller deposits.”
Nonetheless, he acknowledged the importance of high LTI products, particularly for younger borrowers: “These mortgages often mean the difference between buying a house or a flat, or getting a property in a nicer area. It tends to be younger people borrowing over five times salary to get on the ladder.”
Structural constraints remain
While Strutt believes the LTI changes are unlikely to shift behaviour among larger lenders, they may “take some of the pressure off the smaller providers.” He pointed to Nationwide’s six-times-salary lending to first-time buyers—albeit with strict qualification criteria—as evidence that income stretch products are already shaping the market.
The Bank of England estimates that the LTI adjustment could help an additional 36,000 buyers a year. But few in the sector see the policy changes as sufficient in isolation.
“This will help,” said Anderson. “But affordability is still tight. It’s a useful step—but not the full solution.”
With mortgage rates still elevated despite recent base rate cuts, and housing supply far below demand, most in the industry regard Freedom to Buy as a welcome gesture rather than a structural fix. The underlying barriers to homeownership, they argue, remain firmly in place.
