Scotland’s newly launched First Homes Fund, which offers first-time buyers £10,000 towards property purchases, will not resolve underlying housing market challenges, according to a lender participating in the scheme.
The Scottish Government introduced the interest-free loan programme on 24 June, projecting 2,000 applicants within the first 100 days. The scheme is expected to receive 50,000 applications during the current parliamentary term.
Limited impact in high-cost areas
Louise Drummond, National Intermediary Development Manager at Leeds Building Society, said the initiative represents “a constructive intervention” but cautioned against viewing it as a comprehensive solution.
“It is not a silver bullet. Scotland, like the rest of the UK, continues to face supply challenges, affordability pressures, and demographic shifts that require long-term policy focus,” Drummond stated.
The scheme provides £10,000 towards properties priced up to £300,000, covering both new-build and second-hand purchases. In exchange, the Government takes an equity stake, repayable when the property is sold.
Drummond questioned whether the support extends far enough in higher-priced areas, suggesting it “may not materially shift affordability” for buyers facing larger deposit gaps. Similar housing affordability challenges have been documented across UK regions, with developers and lenders seeking innovative financing solutions.
Funding constraints
The annual funding allocation could be exhausted rapidly given anticipated demand, potentially leaving many prospective buyers without support. Drummond advised brokers to identify clients who are “close to being deposit-ready” to capitalise on the scheme before funding caps are reached.
She emphasised that brokers must ensure clients understand the implications of shared equity arrangements for future property value, remortgaging options, and subsequent property transactions. The warning comes as housing affordability pressures intensify across the UK, particularly affecting first-time buyers in high-demand areas.
Drummond noted that “readiness to proceed will be a competitive advantage” given historic demand patterns for similar government-backed schemes, suggesting funding windows may be limited.
Market context
The First Homes Fund arrives as Scotland, alongside the broader UK market, grapples with persistent housing supply shortages and affordability constraints. While the scheme has received support from housebuilders, advisers, and market participants, industry observers suggest it addresses symptoms rather than underlying structural issues in the housing market.
