The government has unveiled a new equity loan scheme, 'Your First Home', designed to assist first-time buyers. The initiative, announced on Saturday, could enable buyers to purchase a new-build home with a deposit of just 2.5%.
Under the scheme, buyers would combine their deposit with a government-backed equity loan, which could cover up to 20% of the property's value. The government states that the equity loan will initially be interest-free, potentially saving buyers hundreds of pounds monthly compared to a 95% mortgage.
However, the scheme is limited to new-build homes sold by developers who choose to participate. Ministers hope this will address a significant barrier for first-time buyers and stimulate demand for new homes, supporting the housebuilding sector.
Critics have raised concerns that another demand-side intervention could inflate new-build prices. Rob Houghton, founder and CEO of reallymoving, warned that channelling buying power into one part of the housing market risks artificially inflating prices. Research from 2019 by reallymoving indicated that first-time buyers using the previous Help to Buy scheme paid 10.3% more for new-build properties.
The Centre for Policy Studies (CPS) also criticised the policy, with Ben Hopkinson, head of housing and infrastructure, stating it subsidises demand without addressing underlying issues of Britain's housing crisis. He called for action on stamp duty and development costs and regulations.
The Chancellor is expected to confirm full details, including household income limits, local property price caps, and the implementation timetable, at next month’s Budget.