Rachel Reeves Unveils Mortgage Reform to Boost Homeownership
By Fidelis News | 15 July 2025 | UK News – Finance & Housing
Chancellor Rachel Reeves has announced a sweeping package of reforms aimed at helping first-time buyers get on the property ladder. Speaking at the Mansion House in London, Reeves outlined plans to launch a permanent mortgage guarantee scheme, ease strict lending rules, and improve how renters’ financial histories are recognised by lenders.
These changes are designed to make homeownership more accessible for millions across the UK amid high house prices and stubborn inflation.
Key Mortgage Reforms Announced
- Freedom to Buy Scheme
The government will permanently replace the temporary mortgage guarantee scheme introduced in 2021 with a new “Freedom to Buy” initiative. This allows prospective buyers to access 95% loan-to-value mortgages with just a 5% deposit. Under the scheme, the government will act as a guarantor for lenders, covering a portion of the risk if a borrower defaults.
It is estimated that the scheme could support more than 80,000 home purchases annually and will operate for at least seven years. Major lenders are expected to participate, making low-deposit mortgages more widely available.
- Relaxation of Loan-to-Income Restrictions
The Treasury has also persuaded the Bank of England to ease rules on high loan-to-income (LTI) mortgages. Previously, lenders were restricted in how many mortgages they could offer at over 4.5 times a borrower’s income. These rules have now been relaxed, giving banks and building societies more freedom to lend based on affordability and financial history.
Experts believe this move could help thousands more buyers access mortgages, particularly in regions where incomes do not keep pace with house prices.
- Rent Recognition for Mortgage Applications
The Financial Conduct Authority (FCA) will begin work on measures that allow consistent rent payments to count toward mortgage assessments. This means that renters who can prove a reliable payment record may no longer be penalised for lacking a formal credit history or large savings.
Reeves stated that this would “reward financial responsibility” and “open the door to responsible renters.”
Support and Praise
The announcement has been welcomed by key stakeholders in the housing and finance sectors.
Nationwide Building Society confirmed it had already expanded its “Helping Hand” mortgage range, reducing the minimum salary threshold for applicants to reflect the changes. Other lenders are expected to follow suit.
Housing campaigners described the reforms as “long overdue.” A spokesperson for Shelter said:
“This could provide genuine support for a new generation of buyers who’ve been priced out of the market for years.”
Criticism and Concerns
Despite the positive response, some critics warn the reforms risk inflating house prices further unless they are paired with a boost in housing supply.
Paul Johnson, director of the Institute for Fiscal Studies, cautioned:
“If we don’t build more homes, helping people borrow more will only push prices higher.”
Consumer group Mortgage Soup also noted that many potential buyers still face the hurdle of raising even a 5% deposit, especially in high-rent areas.
Others pointed to the risks of relaxing LTI rules, fearing that borrowers could overstretch themselves if interest rates rise again.
Political and Economic Context
Reeves’s announcement aligns with Labour’s broader economic strategy to stimulate growth by boosting consumer confidence and investing in key sectors. The reforms were unveiled as part of the government’s Mansion House agenda, which includes other financial sector reforms to modernise Britain’s economy.
The Chancellor has promised that this package will form part of a wider “homeownership drive” and that further housing and planning reforms are expected later in the year.
Summary
Rachel Reeves’s mortgage reforms mark a significant shift in UK housing policy. By lowering barriers for first-time buyers and encouraging lenders to use more flexible criteria, the government hopes to make homeownership a realistic goal for more Britons.
However, without tackling the UK’s chronic housing shortage, the risk remains that easier borrowing could simply lead to further price increases. As the new policies roll out, attention will turn to whether supply-side changes follow.