The government has unveiled a new housing support scheme to boost the property market.
Your First Home aims to “combat malaise” among housebuilders, said The Times, and “get young people on the housing ladder”.
Similar to later versions of the popular but now defunct Help to Buy scheme, it will only be available to first-time buyers.
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But the “devil will be in the detail” that is coming in next month’s Budget, said Property Week, especially to “avoid claims of unfairness” for those who have already put money aside in the government’s Lifetime Isa.
What does Your First Home involve?
Under the Your First Home scheme first-time buyers will be able to purchase a new-build property with a 2.5% deposit backed by a 20% government equity loan, which could “save hundreds of pounds per month compared to a 95% mortgage”, said the Ministry of Housing, Communities and Local Government.
The deposit “eliminates one of the biggest challenges facing would-be homeowners”, said The Guardian, as many first-time buyers can find it hard to save while also covering other costs such as rent, household bills and, in some cases, childcare.
How will it work?
Full details will be revealed in the Budget, but the government has said first-time buyers will be able to purchase a new-build with a low deposit and an equity loan from developers signed up to the scheme.
The government-backed equity loan will be interest-free at the start and with a 2.5% deposit, the upfront costs “should work out considerably cheaper” than a larger loan-to-value mortgage, said The Sun. There will be a local property price cap and a household income cap “to stop wealthier buyers taking advantage of the scheme”.
The terms haven’t been confirmed, but the equity loan will be repayable, “meaning further costs down the line”, said The Independent.
There has been some criticism of the scheme, though. Will Bainbridge, founder of property investment firm Hawthorn Capital, told Money Age it is “irresponsible policymaking dressed up as aspiration”.
He cited the government’s own evaluation of Help to Buy, which estimated that new-build homes attracted a 5.5% premium, with properties purchased through the scheme carrying a further 0.9% over comparable new-builds.
Your First Home vs. Help to Buy
Commentators are describing Your First Home as a revived version of Help to Buy.
Later versions of Help to Buy had “a lot of similarities” to what we know so far about Your First Home, said The Guardian, including an equity loan, new-builds and price caps.
But the “ongoing row” about soaring student loan debts means there will be extra pressure to be “very clear” about how the equity loan interest will work.
Savers can also put up to £4,000 per year in a Lifetime Isa each year to save towards a property deposit, backed by a 25% government bonus.
Any scheme that "penalises those savers”, said Property Week, “would risk widespread criticism”.
