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 announced over the weekend that the ‘Your First Home’ scheme will operate in England, supporting prospective 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 represents a lower entry point than the previous Help to Buy scheme, which required a 5% deposit.
Scheme structure
Similar to the previous Help to Buy Equity Loan scheme, buyers will be able to access equity loans with an initial interest-free period. The scheme will include a household income cap and local property price caps, though specific thresholds will be detailed in the Budget.
According to a MHCLG statement, the scheme will also function as a stimulus for the new-build housing market, which is currently facing pressures from international economic conditions and rising construction costs. Developers will be required to make a contribution when signing up to the scheme to help cover costs.
Housing Minister Matthew Pennycook stated: “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 for the scheme is set to open by the end of the year. Further details, including costs and implementation timelines, will be announced by the Chancellor at the Budget next month.
The announcement follows a Government review of Help to Buy earlier this month, which concluded that the scheme provided value for money in its early stages until more lenders began offering low deposit mortgages.
Market response
Mark Harris, chief executive of mortgage broker SPF Private Clients, noted that the deposit remains the biggest barrier for many first-time buyers without family support. However, he pointed out that Help to Buy worked best for house builders rather than first-time buyers, and suggested that extending a scheme to all homes rather than only new builds would be more beneficial.
Harris added that any stimulus for the housing market could benefit connected industries and the wider economy, at a time when UK buyers are showing different patterns in their property searches.
Alex Slater, Rightmove’s Director of New Homes, welcomed measures to help first-time buyers access home ownership, particularly as housing developers face challenging market conditions. Rightmove data shows that the number of new housing developments coming to market has fallen to its lowest rate on record, highlighting pressures facing the sector.
Slater noted that developers are managing a combination of viability pressures, affordability constraints and competition from a high level of resale homes on the market. The scheme’s impact on broader market dynamics, including deposit-related initiatives across the housing sector, remains to be seen.
Market implications
The scheme represents a direct intervention in the new-build market at a time when construction activity has slowed. By requiring developer contributions, the Government is attempting to share the cost burden while stimulating supply.
The focus on new-build properties means the scheme will not directly impact the resale market, though it may influence overall transaction volumes and first-time buyer activity. The lower 2.5% deposit requirement could expand the pool of eligible buyers, though this will depend on lender participation and the final income and price caps announced in the Budget.
