If you’ve been saving for a deposit and wondering whether it will ever be enough, the government’s recent announcement of Your First Home may have caught your attention. This is a new equity loan scheme that is expected to support 2.5% deposits, backed by 20% government equity loans, for first time buyers purchasing a new build home from a developer signed up to the scheme.
How the Your First Home equity loan scheme works: what we know so far
We don’t have that much detail yet. The expectation is that a first time buyer would be able to put down a minimum of a 2.5% deposit and the government would lend another 20% of the price. The equity loan would have an initial interest-free period and the remaining 77.5% (or less if you were putting down a higher deposit) would come from a participating mortgage lender. Having an equity loan would mean that you would have to borrow less from a mortgage lender, and you would probably be able to access lower mortgage rates too (we would always recommend that you speak to an Independent Mortgage Advisor).
Is Your First Home the same as Help to Buy?
Your First Home marks a return to a model like the former Help to Buy equity loan scheme, which closed to new applicants on 31 October 2022. One difference is that developers will be expected to contribute when they sign up, to help cover the scheme’s costs. The minimum deposit requirement announced is also lower (under Help to Buy, it was 5%), and we expect this new scheme to be more targeted: we expect that there will be both a cap on property purchase price, and on buyer income.
Your First Home eligibility and launch date: what we don’t know yet
Quite a lot! The detail is to be set out at the Budget on 28 October, when we hope to see confirmation of:
- Property purchase price (expected to vary across the country)
- Buyer income cap
- Launch date
- How long the scheme will run for
- Length of the interest-free period
Is a new equity loan scheme good news for first time buyers?
Help to Buy, the equity loan scheme that ran from 2013 to 2023, has at times been criticised for the perception that it increased house prices (making life harder for first time buyers). A recently-published 15-month long independent evaluation of the scheme, however, found that overall, Help to Buy had a minimal impact on house prices. Any increase in prices was found to be larger in areas where affordability was already tighter before the scheme was introduced, but presumably the Your First Home scheme’s stricter targeting will aim to combat this.
Benefits of Help to Buy (again, taken from this independent evaluation):
- To date, around £1.75bn in positive returns have been brought in for the Treasury (and therefore the taxpayer)
- Boosted more than 300,000 people to buy their first home
- 86% of customers were highly satisfied with their new home
- A Net Present Social Value of £25.1 billion, achieving ‘very high’ value for money according to MHCLG’s Appraisal Guide
- Crucially, more than 280,000 new build homes were built because of the scheme (one in seven homes built in England while the scheme was in place)
Can you use Your First Home to buy a Pocket home?
We hope that Pocket buyers will be able to access Your First Home when buying a new build Pocket home, as both Pocket and Your First Home have been created to give first time buyers that much-needed support to buy their first home.
We won’t be able to confirm for sure until we have seen more detail from the government, so watch this space.
In the meantime, Pocket homes remain 100% owned and sold at a 20% discount to the local market, with no need to wait for scheme rules to be confirmed. You can create your My Pocket account to see what you’re eligible for.