New mortgage guarantee scheme savaged by expert

Labour’s new mortgage guarantee scheme is just a rebrand of the Conservative’s Mortgage Guarantee Scheme and will do little more than double down on an existing failure according to mortgage expert Karen Noye (pictured).

The original scheme was launched in April 2021 and has helped just 15,000 buyers a year, with 87% going to first-time buyers.

And, as the average property purchased is £204,716, it is significantly below the national average, making it clear the scheme is not working in the more expensive parts of the country.

Schemes like these are more of a sticking plaster than a solution.”

Karen Noye, mortgage expert at Quilter says: “While well-meaning, Labour’s plans do little to tackle the core problem of high house prices relative to wages, which continue to put homeownership out of reach for many.

“The reliance on 95% loan-to-value mortgages leaves buyers with minimal equity, increasing the risk of negative equity should house prices fall—a real concern in a volatile market.

Adding to the strain

“Schemes like these are more of a sticking plaster than a solution, helping only a fraction of buyers while doing nothing to address the broader affordability crisis.

“Adding to the strain on first-time buyers is Labour’s decision to not extend the increase to the stamp duty threshold—a move that has already sent ripples through the market.

“In the short-term, this policy will trigger a rush of buyers scrambling to complete purchases before the threshold reduction takes effect, artificially inflating house prices as demand spikes.

“In the long-term, it makes homeownership even more expensive for first-time buyers, eroding affordability further and exacerbating the very issues schemes like “Freedom to Buy” claim to solve.”