Latest schemes for first-time buyers

11th July 2023

With two to five year fixed mortgage rates averaging at 6-6.5% and a two year tracker only a little less, it’s not a surprise that property prices have realigned. For those trying to get on the property ladder for the first time they may be wondering what help there is for them, especially as the ‘Help to Buy’ equity loan scheme has been withdrawn.

Well, the first thing to know is that first-time buyers seem to be doing comparatively well in the home-buying market. According to Rightmove, as at May this year, demand from FTBs was 6% higher than in 2019, with the middle of the market up just 3%, and activity at the top end of the market 1% below 2019’s level. Since 2017, FTBs have made up at least 50% of all homes purchased with a mortgage (money.co.uk), and that figure hit an all-time high of 53% in 2022. 15 years earlier in 2007, FTBs represented just 36% of mortgage purchases, so – despite frequent scary media headlines about the affordability squeeze on FTBs – in reality, it’s a sector of the market that has been extremely resilient.

A big reason for the current strong demand from FTBs is that, since 2014, they have been assessed for mortgage affordability based on higher interest rates than were actually available. As a result, they haven’t felt the pressure of rising mortgage rates in the same way as the rest of the market. They have also had a strong incentive to buy, thanks to rising rents, which continue to see record-beating annual increases for most of the UK, and a significant shortage of available rental stock.

But if you’re currently looking to buy your first home and struggling to find something affordable, here are some current schemes and initiatives that might be available to you:

Lifetime ISA

This is a savings product to help you save for either a home deposit or your retirement. You can put in up to £4,000 a year and the government will top it up with a 25% bonus, up to a maximum of £5,000. You must be aged between 18 and 39 to open a Lifetime ISA and can continue to earn the bonus on new payments into the ISA until you are 50.

First Homes Scheme

This is designed to help FTBs in England get on to the ladder by offering certain new-build homes at 30% to 50% less than their market value. To be eligible, you must:

Be over 18 and a first-time buyer
Be able to get a mortgage for at least half the price of the home
Have a total household income of no more than £80,000 (£90,000 in London)

The homes will always remain within the scheme so, when you sell, you have to offer your buyer (who must also be eligible for the scheme) the same percentage discount to as you benefitted from when you bought it.

While this is a good scheme, there are only around 10,000 homes being delivered each year and there may not be any availability in your area. Find out more at GOV.UK.

Shared Ownership

This is where you buy a share of a leasehold property – anywhere between 10% and 75% - and pay rent on the remaining portion, with the option to increase your owned share over time (known as ‘staircasing’). These schemes are offered and managed by local authorities or housing associations, and they’ve been around for many years now. Under the latest government model, launched in April 2021:

The minimum share for purchase was reduced from 25% of the market value to 10%
You are required to buy the maximum share you can afford
The housing provider will support you with essential maintenance and repairs for the first 10 years
The minimum size of share you can buy through staircasing has been dropped from 10% of the market value to 5% and many schemes will allow you to own up to 100% of your home
A new gradual staircasing process has been introduced, allowing you to buy an additional 1% each year

This is a potentially excellent ‘half & half’ option for those who can’t currently afford to buy in the area they have to live or purchase the size of property they need and would otherwise rent privately. For full information, including how to apply, visit GOV.UK.

Deposit Unlock

This is essentially the same as the government’s original NewBuy scheme, but privately run. If you have a 5% deposit, you can buy a new-build home from a house builder that’s participating in the scheme and benefit from an insurance-backed guarantee that allows you to access competitive 95% LTV mortgages rates. The scheme is available to everyone, not just FTBs, and there are no conditions or restrictions when you come to sell in the future.

See the Deposit Unlock website for more information.

And if you’re serving in the armed forces, you may be able to borrow up to 50% of your annual salary, to a maximum of £25,000, interest-free for 10 years. This Forces Help to Buy scheme is essentially a pay advance that can be used to either buy or adapt a home.

If you would like any help assessing which of these schemes might be right for you, or you want to find out which new-build or shared ownership schemes are currently available in your area, just get in touch with your local branch. And to see all the latest information on the full range of help available, visit the Own Your Home government website.