Industry expert says Labour's plan focuses on demand-side solutions but neglects affordability and housing supply issues
Labour’s Freedom to Buy housing proposal has come under scrutiny, with one industry expert warning that it risks failing to tackle the core issues underlying the UK’s housing crisis.
Karen Noye (pictured), a mortgage expert at wealth management company Quilter, said the plan, which aims to make the Mortgage Guarantee Scheme permanent, does little to resolve affordability challenges or address structural flaws in the housing market.
New government data shows that since its launch in April 2021, the Mortgage Guarantee Scheme has supported 45,775 mortgages, with 87% going to first-time buyers. However, the average property value under the scheme is £204,716 — significantly lower than the national average. This raises concerns about the scheme’s ability to help buyers in more expensive regions.
“Labour’s pledge to make this scheme permanent under their rebranded ‘Freedom to Buy’ initiative risks doubling down on policies that fail to meaningfully address affordability issues or the structural flaws in the housing market,” Noye said.
Critics argue that the initiative’s reliance on 95% loan-to-value mortgages leaves buyers vulnerable, particularly if house prices fall, which could push homeowners into negative equity. Noye described the scheme as “a sticking plaster rather than a solution,” noting that it only supports a small number of buyers while failing to address the broader affordability crisis.
Another controversial aspect of Labour’s approach is the decision not to extend the increased stamp duty threshold. Analysts suggest this policy could worsen affordability for first-time buyers in the long term.
“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,” Noye explained. “In the long term, it makes homeownership even more expensive for first-time buyers.”
Noye also compared the Freedom to Buy initiative to the now-defunct Help to Buy scheme, which she said left homeowners facing significant financial challenges. Help to Buy, while initially popular, burdened buyers with rising equity loan interest rates and required them to share property appreciation with the government, making it more costly over time.
“The rising interest rates on equity loans turned what was intended as a helping hand into an additional burden, illustrating the pitfalls of short-term fixes without meaningful market reform,” Noye said.
For first-time buyers, Noye emphasised that the focus must shift from demand-side schemes to policies that address housing supply. She argued that without adequate stock, affordability issues cannot be resolved. Suggestions included incentivising housebuilding, simplifying planning processes, and increasing investment in affordable housing. Additionally, she advocated for measures to reduce the tax burden on first-time buyers.
“Without sufficient stock, no amount of demand-side intervention will solve the affordability crisis,” Noye said. “These structural changes would go much further in supporting aspiring homeowners than merely tinkering with schemes that perpetuate the status quo.
“In its current form, Freedom to Buy risks being little more than a repackaging of existing policies that have already proven limited in their impact. Without addressing the fundamental issues driving house prices and providing long-term certainty to buyers, it is unlikely to deliver the transformative change the market so desperately needs.”
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