A new Government scheme could make buying a first home possible with a deposit of just 2.5%. Here’s what first-time buyers – and anyone who knows one – need to know.
Getting together a deposit is often one of the biggest hurdles facing first-time buyers.
But a newly announced Government scheme, Your First Home, could potentially make that first step onto the property ladder more achievable.
The scheme is expected to allow eligible first-time buyers in England to purchase a new-build home with a deposit of just 2.5%, supported by a Government-backed equity loan worth 20% of the property’s value.
Full details are expected to be confirmed at the Budget, so there are still some important questions to be answered.
For now, here’s what we know.
What is the Your First Home scheme?
Your First Home is a new equity loan scheme designed to support first-time buyers who may otherwise struggle to raise the deposit needed to purchase a property.
Under the proposals announced so far, eligible buyers purchasing a new-build property from a participating developer are expected to be able to use:
- A deposit of 2.5%
- A Government-backed equity loan of 20%
- A mortgage to fund the remaining purchase price
The equity loan is also expected to have an initial interest-free period.
The concept may sound familiar. That’s because it has similarities to the previous Help to Buy Equity Loan scheme, which helped buyers purchase new-build properties using a Government equity loan.
What could a 2.5% deposit look like?
For illustration, on a new-build property costing £300,000, a 2.5% deposit would equal £7,500.
A 20% equity loan would represent £60,000, leaving the remaining purchase price to be funded through a mortgage, subject to eligibility, affordability assessments and the final rules of the scheme.
For someone currently saving towards their first home, reducing the size of the deposit required could make a significant difference to how quickly they are able to consider buying.
However, an equity loan is still a financial commitment and the exact repayment and interest arrangements will be important considerations once the full details are published.
Who will be eligible for Your First Home?
This is one of the areas where we’re waiting for more information.
The Government has said the scheme will be aimed at first-time buyers in England purchasing new-build properties from developers signed up to the scheme.
Household income caps and local property price caps are also expected to apply, with the intention of targeting support towards buyers who need it.
The precise limits, eligibility criteria and implementation timetable are expected to be announced at the Budget.
What could this mean for first-time buyers in Essex and beyond?
For prospective first-time buyers across Essex, surrounding counties and the wider UK, the announcement is certainly one to watch.
Whether you’re looking to buy your first home in Chelmsford, Colchester, Brentwood or further afield, saving for a deposit can be one of the biggest challenges when taking that first step onto the property ladder.
If Your First Home launches as proposed, it could offer another route into homeownership for eligible buyers considering a new-build property.
However, a smaller deposit doesn’t automatically mean a mortgage will be affordable or suitable. Income, existing financial commitments, credit history and a lender’s affordability criteria can all affect how much someone may be able to borrow.
That’s why understanding your mortgage options early on can be so valuable, wherever you’re looking to buy.
“The important thing will be in the detail”
John Lineham, Managing Director of Flagstone, said:
“For many first-time buyers, raising a deposit remains one of the biggest barriers to getting onto the property ladder. Any initiative that has the potential to reduce that hurdle will naturally attract attention.
“The important thing will be in the detail. Buyers will need to understand not just how much deposit they require, but how the equity loan works alongside their mortgage and what it could mean for them over the longer term. We’ll be looking closely at the full details when they’re announced.”
Thinking about buying your first home?
You don’t necessarily need to wait for the new scheme before finding out where you stand.
Flagstone’s highly experienced independent mortgage advisers can help you understand your mortgage options and what may be available based on your circumstances.
As one of the UK’s largest introducers of mortgages, Flagstone has access to competitive and exclusive mortgage rates that may not be available on the high street. Our Mortgage Service Centre also provides support throughout the mortgage journey, helping to make the process as straightforward as possible.
And when the full details of Your First Home are announced, we’ll be keeping a close eye on what they mean for first-time buyers across Essex and the wider UK.
Know a first-time buyer who could benefit?
Share this article with them.
With more details expected at the Budget, anyone hoping to buy their first home may want to start understanding their mortgage options now – so they’re better prepared to assess whether Your First Home could work for them once the full rules are confirmed.
Want to understand your first-time buyer mortgage options? Speak to a Flagstone mortgage adviser today.
The information in this article is based on details announced by the Government ahead of the Budget and is correct at the time of writing. The final eligibility criteria, terms and availability of the Your First Home scheme have not yet been confirmed.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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Availability will depend on your individual circumstances & credit history. Flagstone will charge a fee for arranging your mortgage, in the region of £299, payable on application.
