Labour courts first-time buyers with ‘permanent’ mortgage guarantee pledge

First-time buyers could use the state as a guarantor for their mortgages under a future Labour government, the party has pledged.

Sir Keir Starmer in a statement doubled-down on his party’s pledge to be “on the side of the builders, not the blockers”, as part of wide-ranging plans to boost home ownership.

Amid the General Election campaign, the party said its successor to the Government’s existing mortgage guarantee scheme will be “more comprehensive” under a new “Freedom to Buy” banner.

The party leader said: “A generation face becoming renters for life.”

Sir Keir added: “My parents’ home gave them security and was a foundation for our family.

“As prime minister, I will turn the dream of owning a home into a reality.

“Our changed Labour Party will be on the side of the builders not the blockers, to get Britain building again.

“My Labour government will help first-time buyers onto the ladder with a new Freedom to Buy scheme for those without a large deposit, and by giving them first dibs on new developments.”

According to Labour, its proposed mortgage guarantee scheme – “with the state acting as guarantor for prospective homeowners who struggle to save for a large deposit” – will be “a permanent product”.

The existing scheme allows lenders to purchase a guarantee on part of mortgages, so if a bank decides to repossess a house, the Government could compensate some of its losses.

HM Treasury has designed its existing programme “to increase the appetite of mortgage lenders for high loan-to-value lending” – so buyers face paying smaller deposits for their mortgage.

It is due to end on June 30 2025.

Labour sources have said they will “work with lenders and industry on increasing uptake” of the permanent scheme, if they are able to form a government next month.

Labour has also pledged to “reintroduce housing targets”, fast-track planning permissions on brownfield land and prioritise “grey belt” building, moves which it claims could boost building by 1.5 million homes.

Conservative Chancellor Jeremy Hunt instead courted homeowners and tenants during the General Election campaign this week.

He penned a Telegraph article accusing Sir Keir of “playing the public for fools”.

Mr Hunt said his new “Family Home Tax Guarantee” is a commitment “not to increase the number of council tax bands, undertake an expensive council tax revaluation, or cut council tax discounts”, and to not increase the rate or level of stamp duty which buyers pay when they purchase property.

He wrote: “I am throwing down the gauntlet to (shadow chancellor) Rachel Reeves and Sir Keir Starmer to join us in this pledge.

“This isn’t party political point-scoring. I actually want to see the Labour Party say they will put families first and higher taxes second.”

Council tax banding in England – across categories A to H – is based on property values at April 1, 1991.

David Phillips, Institute for Fiscal Studies (IFS) associate director, described Mr Hunt’s pledge not to raise stamp duty as “sensible”.

He said: “It is one of the most economically damaging taxes levied by the government, significantly increasing the cost of moving and gumming up both the housing and labour market.”

But Mr Phillips added: “The new ‘Family Home Tax Guarantee’ would mean perpetuating the increasingly absurd situation whereby the council tax that households pay is based on the value of their property relative to others in England on April 1st 1991 – a third of a century ago, when Mikhail Gorbachev was President of the Soviet Union and Chesney Hawkes topped the charts with The One and Only.”

Mr Hunt said: “Families need to have the peace of mind that the Government will not spring surprise tax rises on them.”