Your First Home income cap could shut out key workers
An income cap of £90,000 is being considered on the Your First Home scheme, but brokers warn this could exclude many borrowers.
Mortgage brokers have expressed concerns that the Your First Home income cap could shut out high earning couples who still struggle to get on the property ladder.
The Government’s new housing support scheme is set to have a £90,000 household income cap outside London, rising to £110,000 in the Capital, according to a report in The Times.
The scheme is set to replace Help to Buy, supporting a 2% deposit on a new-build for first-time buyers with a 20% equity loan from the Government.
But analysis by news agency Newspage suggests many ordinary workers could miss out.
The danger with a £90,000 cap is that it sounds generous until you put two ordinary public-sector salaries next to each other.”
The research suggests that if two paramedics in London each earned the reported average median salary of £60,797, their combined household income would be £121,594 – exceeding the proposed £110,000 cap.
The Government has dismissed the figures as speculation and said full details of the scheme are expected to be announced in the Budget on 28 October.
However, it has led to fears the scheme could lock ordinary NHS couples and teachers out.
Matt Coulson, Founder at Heron Financial, believes the reported cap could leave many public sector workers ineligible for the scheme.
He says: “Capping it is the right instinct. The original scheme’s biggest flaw was helping people who’d have bought anyway, so some targeting is sensible.
“The problem is that income is the wrong thing to cap on, because it doesn’t tell you whether someone can buy.
“Many couples on average public sector salaries are already over £90,000, yet in plenty of areas that couple can’t get near a first home.
“A couple earning less in a cheaper region might manage comfortably without any help. What decides need is the gap between local prices and what you can borrow and save, far more than a single national salary line.
“A hard threshold makes it worse: being a pound over and getting nothing, while the couple next door qualifies, is hard to defend.
“If they want this to work, tie eligibility to local prices and what’s being bought, and soften the edge with a taper. For now it’s all speculation, so the only sensible thing to tell anyone is to wait for the detail on the 28th before making decisions.”
Postcode lottery
Experts have warned the proposed income cap could create a postcode lottery for first-time buyers.
Samuel Mather-Holgate, Managing Director at Mather and Murray Financial, adds: “The danger with a £90,000 cap is that it sounds generous until you put two ordinary public-sector salaries next to each other. A teacher and a nurse are not exactly plutocrats, yet they could find themselves treated as too wealthy for support while still priced out of the market.
“That is the problem with cliff-edge policy: one pound of income can decide whether you get a leg-up or are left on your own.
“London clearly needs different treatment, but so do many expensive commuter towns and regional hotspots. If ministers are already reviewing unfair cliff edges elsewhere in the system, they should be wary of creating another one in housing.”
