The First Homes scheme is a government scheme designed to help first time buyers in England get onto the property ladder.
Under the scheme, you can buy a home for at least 30% less than its normal market value. In some cases, the discount can be as high as 50%. This means you may need a smaller mortgage and deposit than you would normally need.
To qualify, you generally need to be 18 or over, a first time buyer, and able to get a mortgage for at least 50% of the discounted price. There are also income limits: your household income must normally be £80,000 or less a year, or £90,000 if you live in London.
The home must be your main residence, rather than a property you buy to rent out. There is also a price limit after the discount has been applied: generally, £250,000 outside London or £420,000 in London.
Some councils may have additional rules, such as giving priority to local residents or key workers.
In simple terms, First Homes gives eligible first time buyers the chance to buy a home at a significant discount, making buying your first home more affordable.
“Affordability continues to be a huge challenge for first time buyers. While the availability of low-deposit mortgages has increased, high interest rates and property prices mean a smaller deposit alone isn’t an instant fix. The lowest 95% LTV rate currently available is a tracker at 4.84%, illustrating just how expensive borrowing with a small deposit can still be.
Against that backdrop, we had been hoping for a big announcement from the Burnham government – something that went beyond the long-term promise to build more homes or tinkering with existing policies like the Lifetime ISA, and offered more immediate solutions to young people trying to get onto the housing ladder.
Your First Home is that announcement. The new scheme is effectively a reworked Help to Buy, targeted at first-time buyers who might otherwise struggle to purchase, with a 2.5% deposit and 20% government-backed equity loan. Household income and local property-price caps should also help target the support more tightly than its predecessor.
There are certainly lessons to learn from Help to Buy.
The government’s own recent evaluation found that 54% of those who used the previous scheme said they could have bought a home without it, while Help to Buy properties carried a price premium compared with similar new builds. There is therefore a risk that increasing buyers’ purchasing power also feeds through into higher new-build prices. The sharp rise in housebuilder share prices this morning – Persimmon, Barratt Redrow, Taylor Wimpy and Vistry were all up 13-17% this morning – shows who investors expect to benefit from the policy.
But reducing the minimum deposit from 5% under the previous Help to Buy scheme to 2.5% is a meaningful step forward. For someone buying a £300,000 home, that potentially halves the upfront deposit from £15,000 to £7,500.
Ultimately, anything that genuinely helps more first-time buyers overcome the twin barriers of deposit and affordability is welcome. The key will be ensuring Your First Home creates additional homeowners, rather than simply making new-build homes more expensive.”
Richard Dana, CEO & Founder, Tembo
John Davison, Head of Product, Proposition and Distribution at Perenna, comments on the Government’s ‘Your First Home’ scheme:
“Any innovation towards overcoming the deposit hurdle is a positive step but, as a lender that has long advocated for solutions to Britain’s first-time buyer challenge, we know what appears as a simple solution may bring unintended consequences, without the right focus on the detail.
Your First Home can play an important role in opening the door to homeownership, but aspiring homeowners rarely fit into neat boxes. Many have good incomes and could comfortably afford a monthly mortgage payment, yet find themselves held back by deposit requirements or lending criteria designed around a more conventional workforce. We need a mortgage market that looks at borrowers in the round and provides more routes into homeownership. Specialist lenders have a vital role to play in that, using greater underwriting flexibility to support creditworthy borrowers whose circumstances may not fit the high street mould.
As such, the scheme needs to encourage genuine competition among lenders, rather than creating conditions that disproportionately favour the high street. Otherwise, we risk reducing choice for the very first-time buyers the scheme is intended to support.
We also need to learn the lessons of previous schemes and ensure that developer contributions do not simply become reflected in higher purchase prices, potentially increasing the risk of negative equity further down the line. Previous schemes were also only available on new build property and through selected builders, increasing new build prices and a widening of the new build premium versus non-new build first time buyer stock. Crucially, policymakers also need to think beyond the point of purchase. If house prices stagnate over the coming years, what happens when these borrowers need to refinance? Ensuring there is a healthy and competitive market for borrowers at very high LTVs for remortgage will be just as important as helping them get on the ladder in the first place.”
First Time Buyer is an exciting bi-monthly glossy which takes a stylish and comprehensive look at all the options available, setting them out in an entertaining and informative way, and helping potential customers navigate their way through what is often a daunting and complex process. We dispel the myths, reinforce the facts and arm the reader with the tools necessary to make their homeownership dreams a reality.
