Labour's housing 'revolution': Rachel Reeves proposes 25-year mortgages in boost for first-time buyers

13 January 2024,

Such long-term fixed-rate mortgages are common in other parts of the world, such as Canada, the UK and Japan. Picture: Alamy

 

By Jasmine Moody

LBC

Rachel Reeves had pledged millions of people would experience a "revolution on home ownership", with Labour proposing 25-year fixed-rate mortgages to reduce instability in the housing market

Speaking to The Times, Ms Reeves said that longer fixed-rate deals would allow people to purchase homes with smaller deposits and lower monthly repayments.

Now, she has asked a Labour review of financial services to work with the mortgage industry to take away regulatory barriers and to start a broader cultural shift.

Such long-term fixed-rate mortgages are common in other parts of the world, such as Canada, the UK and Japan.

The shadow chancellor explained to The Times that the British housing market is more exposed to changes in interest rates, impacting first-time buyers

With Labour’s "revolution”, a "10, 25-year mortgage" would allow first-time buyers to be less financially impacted than they are in the current system, and reduce instability in the housing market.

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She said: "If you are locked in for a 10, 25-year mortgage, those stress tests become redundant. Potentially you would be able to borrow a bit more, to put down a bit less of a deposit.

"If you can take out some of that stress and instability, that will make a difference."

Ms Reeves added that she would be reluctant for taxpayers to support lenders in proving said products, as seen in other countries.

Instead, she advocated for the industry to promote a transition away from the current two and five-year fixed mortgages.

She said that "these longer-term deals might make more sense" for many people, but "especially for families".