The launch date of the equity loan scheme has been set for spring, with crucial details such as regional price caps and the developer contributions expected to be announced in days, Mortgage Solutions understands.
Delivering his inaugural Budget, Chancellor John Healey said “hope starts with a home” as he unveiled a package of measures including an affordable and social housing programme, details of the First-Time Buyer ISA, changes to the Lifetime ISA and a timeline for Your First Home.
“[It is] a new scheme for first-time buyers who don’t have the bank of mum and dad behind them,” said Healey, “with £4.7bn of government-backed lending.”
Details revealed
Your First Home will allow a 2.5% minimum deposit and a 15% maximum deposit, with a maximum 20% equity loan regardless of where the buyer lives. Under the previous Help to Buy Scheme, those living in London could take an equity loan of up to 40%.
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Although the scheme is open to pre-registrations from December, full applications will not be accepted until February, with the first equity loans issued from April 2027.
Price caps will be based on local authority median prices while inner and outer London caps will be set at £650,000 and £500,000, respectively. Income caps, leaked in earlier reports, were confirmed at £110,000 per household outside London and £140,000 inside London.
The equity loan will be interest-free for five years, after which there will be a “gradual increase” which has yet to be disclosed.
The Chancellor remained tight lipped about how much developers will be expected to contribute. However, he did confirm they would contribute when signing up to the scheme which would be set on a sliding scale to protect smaller developments. The contribution will be put towards running costs, not the borrower’s loan to value. Mortgage Solutions understands the exact contribution will be disclosed in the coming days.
The scheme is expected to help 70,000 households get onto the housing ladder, supporting the delivery of an estimated 20,000 new homes.
Funding will be capped annually, but the government will work with developers and lenders to monitor demand. Homes England will initially deliver the scheme, supported by the National Housing Bank, which will then take over the running in the medium term. The scheme will be reviewed in autumn next year to “take stock on progress”.
The £4.7bn funding for Your First Home will come from reprioritising departmental financial transactions, for example, the Department for Energy Security and Net Zero will reallocate transactions, including from the Warm Homes Fund, alongside exploring the use of guarantees rather than loans.
