The government’s proposed Your First Home scheme has received a cautious welcome from some quarters and a more critical assessment from others.

The scheme, announced ahead of the 28 October Budget, will allow eligible first-time buyers (FTBs) in England to purchase new-build homes with a 2.5% deposit and a 20% government-backed equity loan. Household income and local property price caps will apply, with further details and a launch date expected in the Budget.

Craig Hall, director of strategic partnerships at mortgage and new-build industry specialist LSL Financial Services, said: "Everyone connected to new homes has been desperate for some sort of government support, so this is hugely welcome.

"The new-build market is in need of reinvigoration. Builders are throwing everything at every customer in incentives and starts and completions have been going the wrong way for a couple of years. This will help get builders building and selling again.

But Hall warned the wait for the Budget could hit new-build transactions in the short
term and that the scheme's long-term success would hinge on where the caps are set.

Hall added: "While this is great news for the industry, there is a risk that first-time
buyers who are ready to buy now will hold off until they know how the scheme works.
That would be a perfectly reasonable reaction.

"The Budget will give us much more to go on. We hope the income and price caps are
realistic, so the scheme works for first-time buyers, wherever they live, and that those
caps are reviewed regularly to keep pace with rising house prices and wages."

A much blunter description came from Will Bainbridge, founder of property investment firm Hawthorn Capital, who called the policy as “irresponsible policymaking dressed up as aspiration”, arguing that the focus should be on building more homes and reducing barriers to supply.

Bainbridge cited the government's evaluation of Help to Buy, which estimated that new-build homes attracted a 5.5% premium, with properties purchased through the scheme carrying a further 0.9% premium over comparable new-builds.

Bainbridge said: "Your First Home is irresponsible policymaking dressed up as aspiration, with little regard for the second-order consequences.

“Encouraging young buyers to commit with such a tiny deposit under the banner of helping them onto the property ladder risks trapping the people the policy claims to help. If they haven’t built up meaningful equity by the time they need to move, they will have very little flexibility, hence the risk of becoming trapped.

“As the scheme is for first-time buyers, they won’t have the same help the second time around and will instead be relying on whatever equity they have accumulated. The policy is very focused on getting people onto the ladder without any real thought to whether they will be able to move up it."

For its part, housebuilders, lenders and brokers will debate how the scheme works in practice at the LSL New Homes Forum on 19 November, three weeks after the Budget.

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