Freedom to Buy mortgage scheme

What is the Freedom to Buy mortgage scheme and will it help you buy your first home?

Rebecca Gamble Consumer Journalist

What is the Freedom to Buy mortgage scheme?

The Labour government has pledged to launch the Freedom to Buy mortgage scheme, which will be a permanent mortgage guarantee scheme, to support lending at 95% LTV. It says that making it permanent will end the stop-start availability of the scheme and give lenders confidence throughout the cycle, while making it easier for first-time buyers to get on the property ladder.

There are few details of the Freedom to Buy scheme yet. However, in the 2024 Budget the government said it will be engaging with industry over the autumn. And it’s understood the scheme will work along the lines of the existing mortgage guarantee scheme.

The government is expected to announce further details of the scheme in Phase 2 of the Spending Review in Spring 2025. We will be updating this page as more information is released. Stay up to date by signing up to our newsletter.

Why was the mortgage guarantee scheme introduced?

The mortgage guarantee scheme was launched in 2021 under the Conservative government to increase the supply of 5% deposit mortgages and stimulate the housing market after the pandemic by supporting lenders with a government-backed guarantee. Since the mortgage guarantee scheme’s launch, over 44,000 households have benefited from it. However, many lenders now offer 5% mortgages without using the scheme.

To find out about all your mortgage options as a first time buyer, get no obligation, fee-free mortgage advice from our partners at L&C.

Why do we need the Freedom to Buy scheme?

The current mortgage guarantee scheme is only due to run until June 2025. By comparison, ahead of the election, Labour said its Freedom to Buy mortgage guarantee scheme would be permanent.

How will the Freedom to Buy mortgage scheme work?

If the Freedom to Buy scheme works in the same way as the existing mortgage guarantee scheme, lenders will pay a fee for the Government guarantee which will then compensate them for a portion of their losses if the house they lend on is repossessed.

The aim is to encourage lenders to offer high loan to value mortgages. The government has said, ‘We will work with lenders and the property industry to increase uptake of the scheme and ensure they confidently offer it to prospective buyers’.

Looking for a first time buyer mortgage? Check out today’s best first time buyer mortgage rates.

Will Freedom to Buy only be for first time buyers?

While it hasn’t been officially announced, we expect the Freedom to Buy scheme will be open to both first time buyers and home movers. This is in part because ahead of the election, Labour said its Freedom to Buy mortgage guarantee scheme would help ‘working people who struggle to save for a large deposit’ – it didn’t say it was just for first time buyers.

Also, the current mortgage guarantee scheme is available to both first time buyers and home movers. Although it’s overwhelmingly used by people buying their first home.

Am I eligible for the Freedom to Buy scheme?

The Freedom to Buy scheme has yet to launch and details are scarce. But if it works in the same way as the current mortgage guarantee scheme, any houses (new or old) would be eligible as long as they cost under £600,000. However, bear in mind that under the current scheme, different lenders have different criteria, such as whether or not you can buy a new build. And they may have different limits on how much they will lend depending on whether you’re buying a flat or a house.

Will the Freedom to Buy scheme help first time buyers?

Saving up for a deposit is a huge barrier for many first time buyers so a scheme designed to make it easier for people to buy with a small deposit will help some first time buyers. And while many lenders offer 5% mortgages without using the current mortgage guarantee scheme, some 44,000 households have taken out mortgages supported by the current mortgage guarantee scheme, according to figures published by the previous government so there’s clearly a need.

Also, the fact the new scheme will be permanent will make it easier for people to plan ahead.

However, if you take out a mortgage with a small deposit you’ll usually pay a higher rate than if you have a bigger deposit. So while it’s easier said than done, if you can save a bigger deposit, you’ll be in a better position. Read our guide on How to save for a deposit.

Another key barrier to home ownership is the amount you can afford to borrow on a mortgage. Lenders usually let you borrow up to between 4.5 and 5.5 times your salary – however, some will lend more than this. But lenders must also assess the monthly payment you can afford, after considering your outgoings as well as your income. This is called an affordability assessment. Read our guide How much can you afford to borrow for a mortgage? Also, find out how much you can borrow for a mortgage with these mortgage calculators.

To find out about all your mortgage options as a first time buyer, get fee-free mortgage advice from our partners at L&C.

What other help to buy first home is out there?

The Government has a range of other schemes to help you afford to buy your home such as Shared Ownership – although this is as complicated scheme and it’s better to buy on the open market it you can. 

Also, Skipton offers a 100% mortgage designed to help renters buy a property if they have a minimum 12 month proven track record of paying rent, as well as, meeting other lending criteria. See our guide for more advice on how to get a mortgage with no deposit.

Deposit Unlock is a scheme developed by the House Builders Federation to help first time buyers and home movers buy a new build home with just a 5% deposit. While the Own New Rate Reducer scheme allows you to buy a new build home with a mortgage and pay a lower mortgage rate than if you buy on the open market with a traditional mortgage. Find out more in our guide Own New Rate Reducer scheme explained.

And there’s also the government First Homes Scheme where you may be able buy a home for 30% to 50% less than its market value when you meet certain criteria (although qualifying properties are very scarce).