A New Helping Hand For First-time Buyers Could Be On The Way

Following news that the Government has announced plans for a ‘Your First Home’ scheme – a new equity loan scheme for first-time buyers in England, designed to make taking that first step onto the property ladder a little more achievable – we’re taking a closer look at what it could mean for first-time buyers.

How is the scheme expected to work?

The scheme is due to be confirmed in more detail at the Budget in October but, under the proposals announced so far, eligible first-time buyers could be able to purchase a qualifying new-build home with a deposit of just 2.5%.

This would be combined with a 20% government-backed equity loan, reducing the proportion of the purchase price that buyers would need to fund through their mortgage.

The equity loan is also expected to include an initial interest-free period. The Government has not yet confirmed how long that period will last or the charges that could apply afterwards.

For somebody saving towards their first home, reducing the size of the deposit required could make a significant difference. However, it’s important to stress that the scheme has only just been announced and the full terms have not yet been confirmed.

Who will be eligible?

The Government says Your First Home will be targeted at first-time buyers who would otherwise struggle to afford their first home.

There will be a household income cap and local property price caps, although the figures have not yet been announced. The scheme will apply to qualifying new-build homes purchased from developers that sign up to participate, with participating developers expected to contribute towards the cost of the scheme.

More information on eligibility, costs and the implementation timetable is expected at the Budget.

What could it mean for first-time buyers?

For many first-time buyers, affordability isn’t simply about the monthly mortgage payment; building a large enough deposit while also paying rent and meeting everyday living costs can make the very idea of buying a home feel unrealistic.

A scheme requiring just a 2.5% deposit could therefore reduce one of the biggest initial hurdles for some buyers.

There will still be more to consider than the deposit alone, with buyers needing to understand the mortgage they can afford, how the equity loan works over the longer term and any future repayments, interest or charges associated with it once the detailed rules are published. 

As with any major financial decision, seeking out independent mortgage and legal advice will be important.

What happens next?

The next important announcement will come at the Budget, when the Government is expected to provide further information about eligibility, property price limits, costs and the timetable for implementation.

At Thomas Alexander Homes, we’ll be following the development of Your First Home closely and, once the full details have been announced, we’ll share more information about what it could mean for buyers looking for a new home in Yorkshire.