First-time buyers could be able to purchase a new build home with a deposit of just 2.5% under a new government-backed scheme.
Prime Minister Andy Burnham has announced the Your First Home scheme in a bid to help more young people onto the property ladder.
Under the plans, announced on Saturday, eligible buyers would receive a government equity loan worth up to 20% of the property’s value.
The loan would initially be interest free, with the government saying this could cut monthly mortgage costs by hundreds of pounds compared with a 95% mortgage.
During an interview with the Guardian ahead of Labour’s party conference in Liverpool – which commenced on Sunday – Burnham said: ‘Too many young people are struggling with housing, with many giving up hope on ever having a home to call their own.
‘So we are going to help more first-time buyers on to the housing ladder, especially those who can’t fall back on the bank of mum and dad.’
To start with, the scheme will be limited to new build properties sold by developers that scheme up to it.
There will also be restrictions on who can apply. The government plans to introduce a household income cap and local property price limits, of which details are expected to be announced in the upcoming autumn budget.
Developers taking part in the programme will also be expected to contribute towards its costs.
Details about the scheme, including how much it will cost, when it will launch or how much buyers will need to earn to qualify, are yet to be revealed.
Tim Foreman, managing director of land and new homes, said: ‘Your First Home is a welcome response to a gap in housing policy.
‘Planning reform can increase the number of homes approved, but developers also need confidence that people can buy them. Helping first-time buyers with the deposit and reducing the size of their mortgage could give more households a route into ownership while supporting the sales needed to get new sites building.’
‘The budget details will determine how much difference the scheme makes,’ Foreman added. ‘Income and local price caps must reach buyers who need help without excluding too many in higher-cost areas, and the terms must encourage developers to participate.
‘Buyers also need to understand from the outset what the equity loan will cost and how they can repay it. If the scheme gets those points right, it could help turn more planning permissions into homes.’
Image: Jakub Żerdzicki/UnSplash
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