PM Andy Burnham is set to announce the First Homes scheme at the Labour Party conference, as a replacement for Help to Buy to provide more targeted financial support for first-time buyers.
Designed to enable first-time buyers meeting certain criteria to obtain loans worth 20% of new build homes, the industry has largely welcomed the scheme so far, although full details will not be revealed until the Autumn Budget announcement. however opponents have criticised the move for placing a ‘levy’ on developers that could stoke house prices and lead to further debts for young people.
The Government-backed ‘equity loans’ will come with an initial interest-free period, and only require prospective buyers to have a deposit of 2.5% of the asking price. There will be a limit on house purchase value of £250,000 (and £420,000 inside London), meaning that the scheme will help buyers with access to the “bank of mum and dad,” said Burnham. The previous Help to Buy scheme had a much higher limit of £600,000 across England.
It is expected that developers will be required to contribute to the funding of the scheme, but this is yet to be confirmed.
The NHBC welcomed the news, but stressed that demand-side improvements must be accompanied by delivery-side: “There is no one single solution to the housing challenge. Supply must also be addressed through accelerated planning reform and the easing of unnecessary regulatory burdens. What’s more it’s vital to keep focus on maintaining quality in the construction of new homes.”
Katy Davis of estate agents Carter Jonas said: “The test will be whether the scheme reflects the very different markets across England. If local price caps are set too low, buyers could find there are few suitable homes they can actually purchase with it. The Budget must also make the longer-term cost of the equity loan clear, so that buyers can judge whether the help they receive at the outset remains affordable later on. Get those details right and this could be a useful addition to the routes into home ownership.”
Joe Nellis, Head of Economic Research at accountancy firm MHA, said: “Britain does not simply have an affordability problem; it has a chronic housing supply problem. Boosting buyers’ purchasing power without delivering substantially more homes risks translating government support into higher prices.”