Freedom to Buy aims to widen access for first-time buyers, but concerns remain over affordability and impact
The UK government has introduced a permanent Mortgage Guarantee Scheme, aiming to help homebuyers secure a property with deposits as low as 5%.
The move is part of a broader effort to make homeownership more accessible, particularly for first-time buyers and those struggling to save for a deposit.
The scheme, now rebranded as Freedom to Buy, will provide lenders with a government-backed guarantee on 91–95% loan-to-value (LTV) mortgages, insuring them against a portion of potential losses. Officials expect this to encourage more lenders to offer high LTV products, supporting up to 36,000 additional mortgages for first-time buyers in the first year.
Alongside the new scheme, the government is relaxing post-financial crisis mortgage rules. Since 2014, lenders have been limited in how many loans they can issue above 4.5 times a borrower’s income. This restriction is being eased, with some lenders now able to offer mortgages at up to six times annual salary.
Nationwide, the UK’s largest building society, has responded by lowering income thresholds for its Helping Hand mortgage. From today, single applicants earning £30,000 – down from £35,000 – and joint applicants with a combined income of £50,000 – down from £55,000 – will be eligible. The lender estimates this will support an extra 10,000 first-time buyers each year.
Chancellor Rachel Reeves announced the changes in Leeds today, describing them as “the widest set of reforms to financial services for more than a decade.”
“The measures today, the Leeds reforms, do represent the widest set of reforms to financial services for more than a decade,” Reeves told finance leaders. “We now need to work together to bring these to life, to make sure – whether it is more first-time buyers getting access to mortgages, more businesses getting access to capital to start up, to scale up, and then ultimately to list in the UK – that is now our job. We’re giving you the tools we now need to work together to achieve that in reality.”
She added that the reforms are intended to “really invigorate our financial services sector, but with the core purpose of therefore reinvigorating the whole economy.”
Industry voices have welcomed the changes but cautioned about risks.
“For quite some time now, there has been a growing sense among would-be first-time buyers that the system is not built for them, said Nicholas Mendes, mortgage technical manager at London broker John Charcol. “What has been announced today does feel like a step in the right direction.
“That said, while these changes will make a real difference to many, they do not provide a complete solution... The regional disparity in house prices means the benefits... will not be felt evenly. There is also the question of long-term affordability... Extending higher loan-to-income mortgages is not inherently risky, but it must be supported by strong advice.
“Still, the tone of today’s announcement is different... If delivered thoughtfully, these changes could help open the door for thousands who have been stuck just outside it for far too long.”
Other industry leaders echoed the need for further action. “Government support for first-time buyers is always welcome - but more needs to be done,” commented Guy Gittins, chief executive at London estate agency Foxtons.
“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. A meaningful review could make a real difference for hardworking people across the UK striving to find a home that fits their needs.”
Meanwhile, Rachel Springall, finance expert at price comparison site Moneyfactscompare.co.uk, acknowledged that the much-anticipated replacement of the Mortgage Guarantee Scheme is part of the government’s plan to boost first-time buyers and will be a permanent policy to improve UK growth.
“Its creation should create a positive sentiment in the market and is designed to encourage more lenders to cater for borrowers with small deposits,” she said. “As it stands, there are still very few deals on the market aimed at first-time buyers with just a 5% deposit, so any boost to product availability should be welcomed.
“This scheme, along with lenders relaxing stress tests and the ongoing considerations about loan-to-income rules, is a great combination for first-time buyers struggling to afford a mortgage.
“However, those borrowing at the higher ends of the loan-to-value spectrum will have little equity in their homes as a result, and disaster could strike if house prices were to plummet. Therefore, seeking advice before entering any arrangement is vital, especially to ensure a deal is picked based on a competitive rate, fees and incentives.”
For Oli Dyer, head of mortgage proposition at Coventry Building Society, the new measures send a strong signal that supporting homeownership is a priority.
“They won’t solve the affordability challenge on their own, but they offer more support for buyers trying to make the numbers work,” he said. “Government backing gives lenders more confidence to offer 95% mortgages, and the ability to move in and out of the scheme brings greater stability and confidence to the first-time buyer market.
“Alongside recent changes to loan-to-income limits and updated guidance on lender stress testing, it’s another step towards easing the pressures on buyers.”
Peter Stimson, director of mortgages at MPowered Mortgages, however, commented that while the rebranded Mortgage Guarantee Scheme is a good idea, it is a year too late, and is missing one vital detail - the cost.
“Big questions remain over the cost of Freedom to Buy, and it will tweak, rather than transform, lending to first-time buyers,” Stimson said. “She would have done better to bring back an updated version of the Help to Buy scheme to boost both housebuilding and access to finance.
“Would-be buyers need more homes to be built, rather than tinkering with a product that the market is already providing on its own.”
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