The proposed Your First Home scheme could more than double the number of new-build properties within reach of single first-time buyers, according to new research from Rightmove.
The property portal estimates that the scheme could increase the number of affordable new-build homes in England by 114% for an average solo buyer.
It could also boost their maximum purchasing power by almost £49,000, while reducing the deposit needed to get onto the property ladder.
The findings are based on the scheme’s proposed structure, which combines a 2.5% buyer deposit with a 20% government-backed equity loan. A mortgage would cover the remaining 77.5% of the purchase price.
Under a conventional mortgage requiring a 5% deposit, an average single buyer could afford a property costing up to £216,758.
Rightmove calculates that the proposed scheme could increase that figure to £265,703. The required cash deposit would fall from £10,838 to £6,643.
The analysis assumes buyers can borrow 4.5 times their annual salary.
North West offers greatest choice
The North West could have the highest proportion of affordable new-build homes under the scheme.
Rightmove estimates that 31% of currently available new-build properties in the region could become affordable to an average solo first-time buyer. That compares with 20% under conventional mortgage arrangements.
Yorkshire and the Humber could also see a substantial improvement, with the proportion rising from 10% to 22%.
In the North East, the figure could increase from 5% to 14%, while the East Midlands could see an improvement from 4% to 13%.
However, affordability would remain a significant challenge in southern England.
In London, just 5% of available new-build homes could fall within the average solo buyer’s purchasing power, compared with 1% currently.
The South East could see an increase from 4% to 9%, while the South West would rise from 3% to 7%.
Hull and Liverpool lead the way
At a local level, Kingston upon Hull could offer the widest choice, with 75% of available new-build homes potentially affordable under the scheme.
Liverpool follows at 72%, ahead of Luton at 53% and Blackpool at 51%.
In Greater London, Hillingdon could see 45% of available new-build homes become affordable to an average solo buyer. Bexley follows at 40%.
Manchester and Salford could also benefit, with estimated affordability levels of 41% and 38% respectively.
Final rules will determine impact
Alex Slater, Rightmove’s director of new homes, said: “Early analysis based on what we know about the Your First Home scheme so far suggests it could make a meaningful difference to the choice available to first-time buyers, particularly those purchasing on their own.
“The combination of a smaller deposit and a 20% equity loan could increase the maximum price an average solo buyer can afford by almost £50,000, while also reducing the amount they need to save upfront. This could bring thousands more currently available new-build homes within reach.
“The impact is likely to vary significantly between local markets. In some areas, the biggest benefit could be an increase from a very limited number of affordable homes today. In others, buyers could gain access to a much wider overall pool of properties.
“The final details announced at the Budget will be crucial, particularly any income and property price caps and regional variations. However, the early figures underline the potential for a well-targeted scheme to help more first-time buyers overcome both the deposit and borrowing barriers.”
Rightmove stressed that its findings are preliminary and based on currently available properties and average regional earnings.
Actual affordability will depend on the scheme’s final eligibility criteria, individual financial circumstances, mortgage lenders’ assessments and developer participation.
The government is expected to provide further details at the Budget.
Comments (2)
Interesting insight into how lower deposit requirements and better financing options could improve access to homes for first-time buyers. Affordability continues to be one of the biggest challenges for new buyers, so initiatives that reduce the initial financial burden could make a real difference.
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Thanks for sharing this useful update.
Rightmove says the new Your First Home scheme could put twice as many new-build homes within reach of first-time buyers. The sums are correct. But they do not mean what they appear to mean.
Here is how the scheme works. The buyer puts down 2.5%. The government lends 20%. A mortgage covers the rest. Today a single buyer on an average wage can borrow around £206,000. With a normal 5% deposit, that buys a home worth up to about £217,000. Under the new scheme, the same £206,000 mortgage only has to cover 77.5% of the price, so the buyer can stretch to about £266,000.
That is where the extra £49,000 comes from. The buyer is not earning more or borrowing more. The government is simply paying a bigger share of the price.
So the real question is this. What are they going to buy? Giving people more money to spend does not create more homes.
Housebuilders do not build as fast as they can. They build at the pace the local market can absorb without prices falling. If buyers suddenly have £49,000 more to spend, the sensible move for a builder is to raise prices, not to build more homes. We have seen this before. Help to Buy used the same 20% government loan from 2013 to 2023. In areas where homes were in short supply, much of that help ended up in higher prices rather than more homes.
Nor will builders suddenly start building flats and starter homes aimed at first-time buyers. The land they are building on now was bought years ago, with planning permission mostly for family houses. Flats have become more expensive and slower to build since Grenfell, and lenders are more cautious about them. No builder will change years of plans for a scheme whose rules have not even been published and which could be scrapped at the next Budget.
I have long said housing should be run as an apolitical department. Setting interest rates was handed to the Bank of England. Forecasting the public finances was handed to the Office for Budget Responsibility. Both were taken out of politics because they need long-term thinking. Building homes takes five to ten years. Politicians think in two.
Announcing a scheme like this without looking at planning or what builders are actually able to build is exactly what happens when housing is left to the political cycle.