During their 2024 general election campaign, the Labour Party announced their plans to launch the Freedom to Buy Mortgage Scheme 2025. Now that they’re in government, here’s what we know so far about the scheme.
What is the Freedom to Buy Mortgage Scheme?
The Freedom to Buy Mortgage Scheme is a permanent mortgage guarantee scheme, which has been designed to support lending at 95% LTV (loan-to-value ratio, or how much you are borrowing compared to the value of the property).
The scheme is essentially a new version of the Conservative Party’s existing Mortgage Guarantee Scheme launched in April 2021.
When Will the Freedom to Buy Mortgage Scheme Launch?
While there is not much information on the scheme’s launch date at the moment, it is expected the government will release more details on the scheme in Phase 2 of the Spending Review in Spring 2025.
Why Do We Need the Freedom to Buy Mortgage Scheme?
The Conservative Party’s Mortgage Guarantee Scheme was introduced to allow for more 5% deposit mortgages and help the housing market get back on its feet after the Covid-19 pandemic. However, this scheme will only be running until June 2025. Whereas, the Freedom to Buy Mortgage Scheme will be permanent.
This change aims to put an end to the stop-start availability of the scheme and help lenders throughout the whole buying process, as well as make it easier for first-time buyers to get on the property ladder. Labour also said the scheme will help “working people who struggle to save for a large deposit”.
How Will the Scheme Work?
Assuming Labour’s version will work the same as the Conservative’s approach, the lenders will pay a government fee to compensate them for a portion of their losses, should the house they lend on be repossessed.
This is designed to encourage lenders to offer high loan-to-value mortgages, meaning you should be able to borrow more compared to the property’s value.
What is the Eligibility Criteria?
While it has not yet been officially announced, if the Freedom to Buy scheme follows the same format as the Conservative’s original version, any houses will be eligible as long as they cost less than £600,000. However, there are different criteria based on whether or not lenders are buying a flat or a house, etc.
Find out more about the Freedom to Buy Mortgage Scheme here.
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