Property industry reacts to Labour’s planned ‘Freedom to Buy’ scheme

Sir Kier Starmer

The Labour Party last night vowed to permanently sustain and expand the Conservatives’ mortgage guarantee scheme, rebranding it ‘Freedom to Buy’.

The party estimates that the policy would help 80,000 more young people onto the housing ladder over the next five years. It would make permanent the current mortgage guarantee scheme, which helps people get a mortgage with low deposits but had been due to expire in June 2025.

It was also announced that Labour would also commit to an overhaul of the planning system if it wins next month’s general election, including reintroducing housing targets, with Sir Kier Starmer claiming his measures will see 1.5 million more homes built over the next five years.

Industry reactions:

Richard Donnell, executive director at Zoopla, commented: “Policies to support people to buy their first home are always welcome. One of the greatest challenges facing first-time buyers is the deposit needed to fund a purchase. The use of high loan-to-value mortgages has fallen since the global financial crisis largely due to tougher mortgage regulations.

Today, the average FTB is putting down 20% of the value of the property as a deposit. In London, this goes up to almost 33%, or £145,000. Over the last 5 years, less than 1% of mortgage lending to FTBs has been over 95% LTV with 20% of new loans between 90% and 95% LTV.

FCA data shows that in 2022 there were 76,000 first-time buyer mortgages over 90% loan to value.

The use of a mortgage guarantee means banks can reduce the cost of the mortgage with a small deposit. While the mortgage rate may be lower, these borrowers will still need to prove they can pay a stressed mortgage rate at a higher level than the actual rate they will pay, which currently averages over 8%.

Small deposit mortgages tend to work in lower-value housing markets where the repayments on a 95% loan don’t account for a high proportion of the buyer’s income. They are much harder to make work in southern England where the affordability pressures on first-time buyers are greatest. Overall it’s welcome news but the projected target will only account for 5% of FTBs a year.”

 

Simon Gerrard, managing director of Martyn Gerrard, said: “I have long been raising concerns that our children will have nowhere to live, and so it is very welcome to see the Labour party introducing policy initiatives to build new homes. The planning reforms and targets that the policy has set are ambitious, but ambition is what we need given the dearth of housing stock available to everybody, and especially first-time buyers.

“We have heard similar policies from the government over the past 14 years, but these have consistently lacked any action, so it is hugely encouraging to see Labour prioritising this issue.”

It is also hugely encouraging to see Labour pledging to help first-time buyers, who have found themselves impossibly locked out of the housing market, and with virtually no hope of ever fulfilling their dream of homeownership. This has been at the detriment to the entire housing market, which needs a healthy inflow of new entrants to the market to function properly.

“The sharply increasing prices of property in the UK will only make this situation worse, and in reality, help for first-time buyers was needed long ago. It is fantastic to see Labour treating this issue as a priority by introducing support schemes to help first-time buyers save for a deposit and finance buying their first home.”

“The Labour party’s proposed policy to offer priority treatment to domestic first-time buyers over international investors is also a welcome change. Even on the rare occasions where housing has been permitted under the current government’s regime, all too often these have not actually provided opportunities for aspiring UK buyers to get onto the housing ladder.

“The lack of funding for councils has not helped the declining rates of housebuilding, and so dovetailing policy to prioritise UK buyers with providing additional funding for councils will supplement efforts to reach the ambitious housing targets that the Labour party has set.”

 

Barratt Developments chief executive David Thomas said: “We welcome proposals that could help more people buy their first home in a challenging market.

“In order to support more people to buy their first home, it is also important that we improve the current planning system, which includes setting housing targets in local plans and recruiting more skilled planners, so local authorities and housebuilders can build the much-needed, high-quality and energy-efficient homes the country needs.”

 

Adam Feather, managing director of Robert Anthony Estate Agents, added: “Any measure designed to help support property buyers is welcome. But we would like to see a scheme introduced that helps all buyers, and not just those acquiring new build homes. We would also like to see more discussion around housing from all the political parties in the run-up to the general election. More needs to be done to help those aspiring to buy property and Labour’s proposal is a step in the right direction.”

 

EYE NEWSFLASH: Labour unveils new housing policy with ‘Freedom to Buy’ scheme

 

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13 Comments

  1. mattfaizey

    ‘on the side of builders’ – is what Kier said.

    I bet you are. This scheme should be open to all purchases. Not just new homes.

    Yet given the language, and history I suspect once again we’ll have support that is designed to prop up the big developers balance sheets. If they honestly felt this were needed to support FTB’s it would/will be available market wide.

    Healthy Markets do not need artificial support.

    Currently, whilst painful (I’m incurring losses as I type) the market is rebalancing. Slowly, but surely.

    By all means stimulate the supply side, but as history has shown, stimulating demand without equal or greater increase on the supply side will simply F&#k the market further.

    You do this, and I promise the average length of mortgages taken by FTB under your administration will be forty years or more.

    Not healthy

    I wouldn’t expect anything other than positive response from those who make their living selling houses for whom looking any further than the next set of accounts oft proves impossible.

    For those with a better understanding of the economics, the effects, moreover the long term damage being done due to the suppression of a free and genuine market in favour of a manipulated and coerced market consider it should shame all those who call for it.

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    1. MrManyUnits

      So 80,000 people over 5 years and last year we had 800,000 population increase, so let’s hope there’s some builders amongst them as I believe we are struggling for construction workers.

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      1. jan-byers

        Kids do not want to wolrk in a trade#
        They think they are better than that
        And the schholls tell them they must go to college
        They want to go to a college and study sociology sadly
        And earn less that they would in a trade

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        1. morrisseysillegitimateburger

          Do you see any irony in your comment Jan? Something tells me you read the Daily Mail from the lazy, uninformed comments you make.

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  2. mattfaizey

    And as for Simon Gerrard above,

    You’d like to claim to be on the side of ‘our children’ yet you support a policy designed not only to inflate asking prices further, but to do so on the back of one of the most rabid, rapid bubbles ever seen.

    Exactly how are you on the side of ‘our children’ when data already shows mortgages at 35 years and up have now become the norm. With any further increases to prices that outstrip wage inflation only sure to increase that measure?

    You’d have to have had not only your head in the sand but have been inversely buried to your ankles to have not seen how every single measure of intervention taken has only made it harder for property ownership to become a reality.

    Then, David Thomas.

    Yes, let’s get comment from a chap in the very part of the sector that has benefitted most from gov intervention/f#*kwittery and stimulus. He’s sure to consider it a bad idea.

    CEO’s from the developers are hardly going to rail against this. They’re likely calculating build out rate suppression against demand expectations right now. Covid has shown we can push c)20-25% increases over 24months through stimulus at the outlier level…..yummy.

    Demand, Vs supply.

    Any current or prospective government really needs to prove they understand this on both a fiscal and timeline level before we allow them the keys to the kingdom.

    Unfortunately, it seems we’re pretty stuffed.

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    1. jan-byers

      Supply – demand – mass immigattion
      Not rocket science
      But kids will vote for a party that wants mass immigration

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      1. morrisseysillegitimateburger

        You’re a Tory supporter? Colour me shocked (that’s sarcasm by the way, I know you struggle).

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  3. AMROBINSON

    The UK housing crisis continues to worsen, as widely reported in the media. Yet, as many as 1 in every 25 homes in the UK is Empty according to actionemptyhomes.org.

    A baffling correlation exists between the volume of vacant properties and increasing housing demand that has spurred the government to call on private developers to help.

    One of the key frustrations is that so many empty homes could be repurposed with professional property management, adding value to local communities and plugging housing availability gaps.

    clearway.co.uk/news/how-many-vacant-properties-are-there-in-the-uk/

    The big developers build moderately adequate housing on estates with no or limited services such as GPs, retail or even schools. They cajole, threaten buyers to exchange quickly whilst giving inducements to use a conveyancer who won’t ask too many questions.

    I have no faith in any Government to do anything useful at all in relation to housing other than look after the developers themselves.

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  4. NW.Landlord

    I find the whole concept of helping one type of customer a bit strange. A new development with say 3 bed 3 storey town houses, two potential customers. Both young couples. One rent, the other buying a tiny street fronted terrace. Both want to move into the new development. Why would one be helped more? Are the couple who took the step into ownership somehow inferior or less worthy of help?
    Equally a couple who kids have fled the nest want to downsize and free up a 4 bed with a big garden for a family – they can’t because the only way the government is going to achieve the first time buyer numbers is some kind of target with penalties or incentives. So skew the market and then discover all sorts of unintended consequences. Scotland has had market intervention for renting. How’s that going?

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  5. aSalesAgent

    For God’s sake! We don’t need more buyers, we need more properties to put them in! Every time we get one of these schemes, like SDLT holidays for FTBs, we end up with too much demand and not enough supply, resulting in house price increases and FTBs being priced out again.

    We need more homes built (that are of MUCH better quality and pro-environment) and we need to encourage older people to downsize from homes that are much larger than they require or can comfortably maintain. Perhaps a SDLT holiday for downsizers, to free up homes for the next generation’s growing families.

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    1. jan-byers

      No we do not
      We are destroying wildlife whose ho,me this is and the wonderfull green landscape
      We are also building on farms when there will be food shortages due to population increases and global warnimng
      We eed LESS PEOPLE

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      1. morrisseysillegitimateburger

        We do need less people, do you want to be first in the reduction? The world would definitely be a better place for it.

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  6. Jason Coombes

    The supply issue is the biggest problem faced by the property industry, as a surveyor I have been asked to comment on the state of the market and find it increasingly frustrating that any of the major parties (certainly those that are in a position to form government) seem to listen to the RICS or Propertymark. It is clear that those forming housing policy are either influenced by those that lobby, both builders and Shelter, yes the charity. They spend millions on lobbying government.
    Without building or freeing up existing homes prices will continue to grow. We are getting to a point where the demands from lenders to get a mortgage are prohibitive, house prices are astronomical and rents are at a level where they are more than tenants can or should pay. I would add at this point before commentators start attacking the evil Dickensian villains that landlords are portrayed as, both in main stream media and social media, rather than constantly eroding the private rental sector, government could have engaged with this sector to create long term tenancies, 5 years plus with a rent set at say 90% of market value with some light repair / decor responsibilities for the tenants and a tax incentive for landlords to encourage them to enter into long term tenancies, this could be complemented by a short term licence for those that only require shorter terms and 100% market value. This would be a win for all, tenants get a fairer rent and long term stability in exchange for some light maintenance work, landlords get a tax incentive easing the ever increasing costs they face.
    In regards to sales, the solution is to make more homes available, demand need to match or exceed supply to drive pricing down. You don’t need to be an economist to understand that. Equally, I find it difficult to accept that those in politics cannot understand this simple fact either.
    I fail to see why ‘Freedom to buy’ doesn’t apply to all and merely first time buyers, surely this could be considered as discriminatory, surely extending to other buyers would free the maket up more.
    I totally agree with Matt Faizey, a healthy market does not need artificial support, so to extend his question, if the scheme isn’t to help the market, buyers, sellers and the tens of thousands of people who work within the sector, who’s it for?
    Yet another political soundbite that will, if it comes into effect only benefit big business.

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