Freedom to Buy: the permanent 95% mortgage guarantee
Labour's scheme makes government backing for low-deposit mortgages permanent: the state guarantees part of the lender's risk on 91–95% loans, so buyers with a 5% deposit can get a mortgage — without the scheme lapsing every few years.
How it works
Lenders are wary of 95% mortgages because a small price fall puts the loan underwater. Under Freedom to Buy the government guarantees a slice of the lender's potential loss on loans between 91% and 95% of the property's value (up to £600,000), for a commercial fee — making banks willing to offer them. It's the successor to the previous government's on-again-off-again mortgage guarantee scheme, made permanent so lenders build it into standard ranges. The buyer still passes full affordability checks and pays the (higher) 95% interest rates.
The case for
- The deposit, not the monthly payment, is the wall for most renters — many pay more in rent than the mortgage would cost. This attacks the wall directly.
- Permanence matters: lenders staffed and priced the old scheme cautiously because it kept expiring.
- No taxpayer cash up front — the state prices a guarantee, as it does for exports.
The case against
- Economists' standard objection to all demand-side help: more purchasing power against fixed supply raises prices — Help to Buy's record looms large.
- 95% borrowers are the most exposed to negative equity if prices fall.
- It does nothing about supply — which is why Labour pairs it with the 1.5-million-homes target, and why critics judge the package by housebuilding numbers, not guarantee volumes.
The context
Every party attacks a different wall for first-time buyers: Freedom to Buy (deposits), the Conservatives' First Job Bonus (deposit savings) and stamp duty abolition, Reform's 0% below £750k. Compare them all in the first-time buyer head-to-head, and test a purchase in the mortgage calculator.
Sources & further reading
- HM Treasury — scheme launch and terms.
- Bank of England — data on high-LTV lending.
- Institute for Fiscal Studies — evidence on demand-side housing subsidies.
Figures are from public material and may change. Not financial, legal or tax advice.