The Government has confirmed plans for a new equity loan scheme aimed at first-time buyers, with full details to be announced at next month’s Budget.
The Ministry of Housing, Communities and Local Government (MHCLG) announced that the ‘Your First Home’ scheme will operate in England, supporting first-time buyers purchasing new-build properties from participating developers.
The scheme is expected to support 2.5% deposits, backed by 20% government-backed equity loans. This is lower than the previous Help to Buy scheme which required 5%.
Similar to Help to Buy, buyers will access equity loans with an initial interest-free period. The scheme will include household income cap and local property price caps, with thresholds to be detailed in the Budget.
According to MHCLG, the scheme will also function as stimulus for the new-build market, which faces pressures from international economic conditions and rising construction costs. Developers will be required to make a contribution when signing up to help cover costs.
Housing Minister Matthew Pennycook said: “We’re acting to support those who can’t rely on help from the bank of Mum and Dad. Our Your First Home scheme will help more families get their first rung on the housing ladder with a deposit of just 2.5%.”
Pre-registration is set to open by end of the year.
The announcement follows a Government review of Help to Buy which concluded it provided value for money in early stages until more lenders began offering low deposit mortgages.
Market response:
Mark Harris, CEO of SPF Private Clients, noted deposit remains biggest barrier for many without family support. He said Help to Buy worked best for house builders rather than buyers, and extending scheme to all homes rather than only new builds would be more beneficial. He added stimulus could benefit connected industries.
Alex Slater, Rightmove’s Director of New Homes, welcomed measures to help buyers. Rightmove data shows number of new developments coming to market has fallen to lowest rate on record. Developers face viability pressures, affordability constraints and competition from resale homes.
Market implications:
The scheme is direct intervention as construction slows. By requiring developer contributions, Government is attempting to share cost burden while stimulating supply. It will not directly impact resale market, but may influence transaction volumes. The lower deposit could expand eligible buyers, depending on lender participation and final caps.
Source : Propertywire
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