The government has announced plans for a new equity loan scheme for first-time buyers in England, with its final details to be confirmed at next month’s Budget.
Called Your First Home, the scheme is expected to allow eligible buyers to purchase a new-build property with a 2.5% deposit, supported by a government-backed equity loan worth 20% of the purchase price. Homes must be bought from developers signed up to the scheme.
The announcement followed a Financial Times report that prime minister Andy Burnham had agreed to revive an element of the former Help to Buy programme. The government has now confirmed the name and outline of its proposed equity loan scheme, although it has yet to set a launch date.
Your First Home will have an initial interest-free period on the equity loan. The government says this could save buyers hundreds of pounds a month compared with taking out a 95% mortgage, depending on their circumstances. It has not specified how long that period will last.
ELIGIBILITY DETAILS TO FOLLOW
The scheme will have a household income cap and local property price caps, intended to target help at buyers who could not otherwise afford their first home. The thresholds will be set out at the Budget.
Participating developers will also be expected to contribute towards the scheme’s costs. The government says further information on funding and implementation will be announced by the Chancellor next month.
Ministers say the measure is intended both to tackle the deposit barrier and to support demand for new-build homes amid rising construction costs.
The previous Help to Buy equity loan scheme ended in 2023. The government’s announcement does not propose a new mortgage guarantee alongside Your First Home.
On X Prime Minister Andy Burnham said: “Let’s be honest. A lot of young people have stopped believing they’ll ever own their own home.
“That’s what happens when rents are high, house prices are high, and saving for a deposit feels impossible. My Labour government is stepping in to help.
“With Your First Home, first-time buyers will be able to buy a new-build home with a deposit of just 2.5%.
“Because hard work and saving should count for something. And because the dream of owning your own home shouldn’t belong only to those with help from the bank of Mum and Dad.”
“Shameless populist vote grabbing.”
But also taking to X, Charlie Lamdin of BestAgent blasted: “Anyone struggling to afford a home should be absolutely furious if Labour do this, after it has been shown to leave more people behind, put buyers into negative equity and prop up property ponzi prices.
“Shameless populist vote grabbing.”
RISK FACTOR
Rob Houghton, Founder and CEO of reallymoving, says: “This will be exciting news for the many first time buyers out there struggling to raise a deposit without financial help from their families.
“Our research found it takes the average First Time Buyer in England almost a decade to save enough to get on the housing ladder, including moving costs, and that’s assuming they can put aside 10% of their earnings every month.
“The Your First Home scheme will bring the possibility of home ownership within reach far sooner. A 2.5% deposit on the average first time buyer purchase price in England of £250,000 would be just £6,250 – an amount some will already have saved. Suddenly the dream of home ownership isn’t so far away.
“There is a risk, however, that boosting the buying power of first time buyers and channelling it into just one part of the housing market could artificially inflate prices.
“Our research in 2019 found that First Time Buyers in England using the old Help to Buy scheme paid 10.3% more for their new build home compared to those buying new builds without the scheme. As buyers with limited means to raise a deposit were funnelled into the scheme, unable to consider other options, developers had scope to charge higher prices.
“First time buyers should compare prices carefully with homes, new and resale, outside the scheme to ensure they are getting good value for money. We look forward to hearing more in the Budget, including how the scheme will build on the lessons of Help to Buy.”
‘BEST FOR HOUSE BUILDERS’
Mark Harris, CEO of mortgage broker SPF Private Clients, adds: “The deposit is the biggest barrier to many first-time buyers getting onto the housing ladder if they don’t have the help of the Bank of Mum and Dad. So any assistance here will make a real difference to those struggling to buy on their own.
“However, let’s not forget that Help to Buy worked best for house builders, not so much for first-time buyers.
“Extending a scheme to all homes would be so much better than simply targeting new builds, and I cannot see a huge issue in doing so.
“That said, any stimulus for the housing market is a good thing. The market is flat and needs some intervention to kick start it. More activity and an increase in transactions would benefit not just the housing market itself but the many connected industries and wider economy.”
