The ‘Your First Home’ scheme will allow first-time buyers to purchase a property with a 2.5% deposit.
Under the proposal, the government will provide an equity loan worth up to 20% of the value of a new-build home to help fund the purchase.
The equity loan will initially be interest-free, although the length of this period has yet to be confirmed.
Announcing the scheme, Burnham (pictured) said: “Too many young people are struggling with the cost of housing, with many giving up hope of ever having a home to call their own.
“So we will step in to help more first-time buyers on to the housing ladder.”
Your First Home: confidence to build
Sponsored by Halifax Intermediaries
Further details of the scheme are expected to be announced in the October Budget.
Nicholas Mendes, mortgage technical manager and head of marketing, said the scheme was certainly helpful, but more could be done to further support the wider market.
“Your First Home is also far from the only option, and the deposit needed varies considerably depending on the route,” he said.
Mendes explained how different lenders have their own first-time buyer schemes that could navigate the “trade-off” – this being the size of the final mortgage.
‘Reverse buyer shortfall’
The Intermediary Mortgage Lenders Association (IMLA) welcomed the new scheme, arguing it could reverse the shortfall of first-time buyers.
Kate Davies, executive director of the IMLA, said: “We very much welcome the government’s decision to introduce Your First Home.”
She added: “There are real advantages to building on an equity loan model with which lenders, advisers and developers are already familiar. We also have a decade of experience from Help to Buy to draw on.”
Stephanie Charman, chief executive of the Association of Mortgage Intermediaries (AMI), said: “The success of the scheme will depend on getting the detail right.
“Mortgage advisers will have an important role in helping consumers understand whether the scheme is right for them and, crucially, whether the borrowing remains affordable over the longer term.”
‘Help to Buy worked best for housebuilders’
Mark Harris, chief executive of SPF Private Clients, said: “Let’s not forget that Help to Buy worked best for housebuilders, not so much for first-time buyers.”
The government’s recent evaluation of the Help to Buy scheme found little evidence that it increased homeownership in areas that were already relatively unaffordable before the scheme’s introduction.
Harris proposed the scheme should not be restricted to new builds only.
“Extending a scheme to all homes would be so much better than simply targeting new builds, and I cannot see a huge issue in doing so,” he added.
Similarly, Rob Houghton, founder and CEO of Reallymoving, said: “There is a risk, however, that boosting the buying power of first-time buyers and channelling it into just one part of the housing market could artificially inflate prices.”
Lucian Cook, head of residential research at Savills, added: “This announcement has the added advantage of coming at a time when house prices are relatively depressed. That means the government should enjoy a decent financial return on its investment, on the basis we see interest rates fall over the medium term.”
