Rachel Reeves wants to shake up the mortgage market. It won't work

The National

19 hours ago

Rachel Reeves is making one final effort to win over the public and stop that P45 landing on her desk. It's a risky move, one that carries echoes of desperation. Her latest proposal is a shake-up of the mortgage market, introducing an insurance scheme aimed at encouraging lenders to offer riskier loans, particularly to first-time buyers.
The idea is simple: Under this scheme, lenders would be backed by government guarantees, allowing them to offer mortgages that might otherwise be deemed too risky.
In theory, this would help more people get on the property ladder. Estimates suggest it could result in up to 36,000 additional mortgages in the first year alone. Some of these loans would allow buyers to borrow over 4.5 times their salary.
While Reeves and the Government may present this as a genuine attempt to boost homeownership, many will see it as an 11th-hour attempt to claw back public support. After a year of failing to significantly improve lives, shift the economic dial, or offer any meaningful change, this policy may be her final pitch to first-time buyers in the hope of scoring a few thumbs up.
It's also a bid, transparently, to stimulate economic growth – the elusive goal Reeves and her colleagues have been relentlessly talking up since taking office. Yet, for all the rhetoric, the reality is that growth remains stubbornly sluggish. So, the solution? Dust off the old Blairite playbook, flirt with deregulation, and chase short-term economic gains. But we've been here before – and we know how it ends.
Let's not forget what we learned nearly two decades ago: Risky mortgage lending can backfire catastrophically. It's hard to ignore the irony that Reeves, who worked in banking during that period, now wants to open the door to risk once again.
The Financial Conduct Authority's Chief Executive has already warned this year that relaxing regulations could be dangerous. This at a time when some experts are calling for greater support to help borrowers with repayments. Why? Because more mortgages handed out for Reeves means a boost in economic growth, which means less tears shed during PMQs.
Make no mistake though, this is not about fixing the affordability of the housing market, this is not to make it fair for first-time buyers. The housing market means growth; it doesn't make for homes at a fair price.
READ MORE: Four ways Mairi McAllan can fix Scotland's housing crisis
So what should she do?
To actually fix the housing market and make it easier for first time buyers will require more than a simple bit of risky deregulation. House prices are simply too high, with little controls to protect buyers, we don't build enough houses, and the price and quality of what we do build is often dictated to by construction firms. If anything this move has the potential to create a housing bubble similar to that of the financial crash.
All recent government interventions and policies to aide those into the housing market are a feeble attempt that relies completely on markets. They usually end up having a negative impact on first-time buyers and mostly benefit those who were already "winning".
Take the Conservative's Help to Buy scheme; on the surface it seems like a helpful option for those who need a little boost getting onto the property ladder. In reality it just helped to inflate property prices and deliver very little value for money.
Home builders made a lot of money from this scheme, taxpayers money that would have been better spent building more social housing, among many other things. Some wanted it to be named "Help to Sell" as it left the door wide-open for construction firms to charge inflated prices. Although schemes like these were supposed to have wondrous effects they've left even more people stuck in the expensive cycle of private renting.
And who could forget perhaps one of the most infamous housing policies, Right to Buy. Boy did that do a number on us. You can't deny Thatcher will long be remembered after her death, for all the wrong reasons. This top 10 worst housing policy continues to plague us to this day.
READ MORE: Housing associations welcome the end of Thatcher's right-to-buy policy in Scotland
Reeves will add to the list of UK Government policies that were useless at enacting any kind of meaningful change and instead ignore the deeper problem. Still looking to use our housing market as a driver for GDP, to drive growth, and ignore those who are struggling by fobbing them off with smoke and mirror policies.
If the Government truly wants to support people, they must commit to building social housing, reform council tax to better reflect property values, and implement safeguards against market exploitation. That's what would win people over, not risky policies that benefit developers and banks.
With inflation rising once more and Reeves's job security wavering. What would restore public confidence isn't mortgage deregulation – it's a bold, honest commitment to making housing truly affordable.