Yahoo Finance First Homes Scheme launches: Everything you need to know
A new government-backed scheme, to help first-time homebuyers in England get on the property ladder, launched on Friday in the Bolsover district in the East Midlands.
The First Homes Scheme offers homes to first-time buyers with discounts between 30% and 50% compared to the market price, enabling people to buy with a lower deposit or to snap up bigger properties for their money.
Properties went on the market on Friday as part of the first phase of the project in Derbyshire.
The government said the scheme is aimed at first-time buyers in the area where the homes are built, many of whom will be key workers such as NHS staff and those on the pandemic frontline such as delivery drivers and supermarket employees.
Why has the scheme been launched?
Just like the 95% mortgages scheme and the shared ownership scheme, First Homes has been launched to help make home ownership more affordable and accessible for aspiring home-owners.
Delivery of the scheme is part of the government’s wider pledge to build 1 million new affordable and attractive homes in this parliament, and help put home ownership within reach for people across the country.
It forms part of a range of ownership options to help people get on the housing ladder, amid a rise in demand during lockdown. Official statistics showed that more homes were delivered in 2020 than in any year since 1987.
The UK government has confirmed that a further 1,500 First Homes will be put on the market this year, and at least 10,000 per year being delivered in the years ahead and more if there is demand.
“Enabling more people to buy their own homes is at the heart of the mission of this government, and First Homes will offer a realistic and affordable route into home ownership for even more people who want to own their own home,” said housing secretary Robert Jenrick.
“Thanks to First Homes, we will offer more homes to local people and families, providing a route for first-time buyers to stay in their local areas rather than being forced out due to rising prices.”
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Who qualifies?
The scheme is available to first-time buyers only, which applies to those buying within a couple or as part any other group.
The most expensive properties available under First Homes will be £420,000 in London, and £250,000 in the rest of England, and annual household income should not be more than £80,000, or £90,000 in Greater London.
Applicants will also usually need to live, work or have another connection, such as a family member, in the area they are looking to buy their new home.
Councils will also be able to prioritise the homes for key workers such as nurses and teachers who have been looking to get on the housing ladder while supporting their community throughout the pandemic.
Each individual local authority can set a local connection test to determine who should be prioritised for the scheme based on the needs’ of their communities.
What are the benefits?
The biggest benefit of the scheme is the affordability of properties for first-first buyers. House prices have surged by almost 11% in the past year and experts believe there could be an influx of demand.
Tim Bannister, Rightmove’s director of property data, said: “There’s likely to be a scramble for properties under this scheme as they become available, especially as we’ve already seen an influx of first-time buyers enter the market recently, helped by more lower deposit mortgages being available.”
The discount of at least 30% will also be passed on with the sale of the property to future first-time buyers, meaning homes will always be sold below market value, helping local communities and families for future generations.
Watch: How much money do I need to buy a house?
The COVID-19 crisis has led to a reduction in the availability of high loan-to-value (LTV) mortgage products, leaving many households unable to get on to the housing ladder.
Low-deposit mortgage availability has shrunk since the pandemic hit due to rising unemployment, increased lender caution and record high property prices. Earlier this year the Treasury said there were only eight low-deposit products available nationwide in January 2021.
However, major high-street lenders Halifax and Nationwide Building Society, along with local building societies and community lenders, said that they will offer high LTV mortgages against First Homes to support the roll-out of the scheme.
What are the cons?
According to research by estate agent Savills, buying a typical two-bed flat under the scheme would still be unaffordable for 88% of households in London, and 68% in some areas of the South East, where average house prices are higher than the rest of the country.
One of the key differences between Help to Buy and First Homes is that the former means buyers have access to all of the equity in their home once they have paid back the government.
However, properties under the First Home scheme will remain as a First Home and buyers must sell their house at the same percentage discount that they bought it with.
The scheme may not benefit those who use it to climb the property ladder as homeowners will be required to sell their First Home on at a discount.
“If they purchased their home with a 30% discount, when they come to sell they will only receive 70% of the sale proceeds. Unless they can buy their next home with a similar discount, how will they be able to afford the market price?” said Anthony Codling, chief executive of Twindig.
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