Questions raised about Your First Home scheme

The motives behind the Government’s new Your First Homes scheme have already been called into question.

It was confirmed at the weekend that a revived Help to Buy initiative for first-time buyers will be unveiled in next month’s Budget.

Housing Minister Matthew Pennycook said first-time buyers would be able to purchase a new-build with just 2.5% deposit on top of an equity loan from the Government.

The scheme will also set a household income cap with local property price caps, the detail of which will be set out in the Budget.The aim is to help people onto the property ladder and boost supply but some commentators have already questioned the tactics.

Whether the Government’s motive is to really help first-time buyers or drive business for struggling developers remains to be seen.”

James Nightingall (pictured), Founder of property search service HomeFinder AI, says: “The Your First Home scheme looks promising on paper but whether the Government’s motive is to really help first-time buyers or drive business for struggling developers remains to be seen.

“We won’t know until details such as the interest-free period, price caps and subsequent charges have been revealed in next month’s Budget. Either way, the new-build sector was in dire need of an initiative that gets the market moving again and if the scheme goes ahead, there’s no doubt it will boost buyer motivation.”

Who will new Help to Buy scheme help?

Similarly, Rebecca Wilson, Head of Residential New Homes at Bidwells, Cambridge, warns the scheme needs to be attractive and workable for buyers and lenders.

She says: “We’ve seen initiatives like this before, including Deposit Unlock, how the mechanics of a scheme can ultimately determine whether it works effectively at scale. We need to keep in mind that it’s not a silver bullet solution for the market.”

“The affordability question will also be critical. Property price caps could make a real difference in some areas, but they will not make every market affordable, and the scheme cannot be expected to kick start every part of the country in the same way.

“Timing is everything. It is important that the Government now moves quickly to implement the scheme. With rents continuing to rise, first-time buyers need clarity on when and how the scheme will operate and we can’t risk stalling the market. There is a real risk that any uncertainty around its introduction means further stalling activity in the short term.

“The housing industry needs a shot in the arm, and this could provide that. The Budget will be the key moment to understand the detail, particularly around the price caps for this and implementation.”

Richard Donnell, Executive Director at Zoopla, says a new, targeted equity loan would increase the buying power of first-time buyers, but adds that the greatest impact on housing delivery will come if it is accompanied by more homes being built at the price points and in the sizes first-time buyers are looking for.

He says: “The detailed price caps announced at the Budget will therefore be important in determining how much additional demand the scheme can unlock.”