January 13, 2024, 16:51 | Updated: 13 January 2024, at 16:54
Rachel Reeves has pledged that millions of people will see a “revolution in home ownership”, as Labor proposed 25-year fixed rate mortgages to reduce instability in the housing market.
Speaking to The Times, Ms Reeves said longer fixed-rate deals would allow people to buy homes with smaller deposits and lower monthly payments.
Now I asked A exhaustion Financial Services Review to work with the mortgage industry to remove regulatory barriers and initiate a broader cultural transformation.
Such long-term fixed-rate mortgages are common in other parts of the world, such as Canada, the United Kingdom, and Japan.
The shadow chancellor explained to The Times that the UK housing market is more vulnerable to changes in interest rates, which affects first-time buyers.
With Labour’s “revolution”, a “10- or 25-year mortgage” would allow first-time buyers to be less financially vulnerable than under the current system, and reduce instability in the housing market.
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“If you’re locked into a 10- or 25-year mortgage, those stress tests become redundant. You’ll probably be able to borrow a little more, to put down a little less than a deposit,” she said.
“If you can release some of that stress and instability, it will make a difference.”
Ms Reeves added that she would be reluctant for taxpayers to support lenders in substantiating said products, as seen in other countries.
Instead, it called on the industry to promote a shift away from current two- and five-year fixed mortgages.
“These longer-term deals may make more sense” for many people, she said, but “especially for families.”