New mortgage guarantee scheme and loosening of mortgage rules to ‘unlock homeownership’

The government has announced the introduction of a new mortgage guarantee scheme and has lent its support for the FCA’s proposed review of mortgage rules which could loosen rules around lending. 

Details on the launch of the new government-backed mortgage guarantee scheme will be outlined ‘in due course’ and is the fulfilment of a promise made in the run up to last year’s election. In the grab for votes ahead of the General Election in 2024, Labour announced it would introduce a permanent mortgage guarantee scheme if voted into power; at the time it was labelled “Freedom to Buy.” Thew new scheme will replace the existing Mortgage Guarantee Scheme, which was due to expire this year. The government say ‘by making the Mortgage Guarantee Scheme permanent and comprehensive, banks and building societies will have long-term confidence to continue offering low-deposit mortgages.’

Housing Minister Matthew Pennycook said:

“The affordability challenges facing first-time buyers mean that we now have a generation locked out of homeownership . This government is determined to change that, ensuring that young families and hardworking renters can buy a home of their own.”

The number of first time buyers (FTBs) fell to a 10 year low in 2023 and despite rallying in 2024 to the highest proportion of the buying demographic than ever before, today’s under 30s are less than half as likely to be home owners than those at the same age in 1990.

The government have written to the Financial Conduct Authority (FCA) following their response to the government’s call for regulators to support growth, outlining the government’s support for the proposed review of mortgage rules which may result in a relaxation of stress testing on lending. In the letter the Economic Secretary to the Treasury said it wanted the FCA’s review to be ‘as ambitious and rapid as possible to help as many people as possible to achieve the dream of owning a place of their own.’

City Minister Emma Reynolds added:

“For too long politicians have ducked and dodged the decisions needed to support homeownership. Simplifying responsible lending rules and putting in place a permanent mortgage guarantee scheme shows our commitment to making the dream of owning a home a reality. I will work closely with regulators and industry to get this done quickly and in a way that supports as many people as possible.”