Some of the lowest earning first-time buyers will get an extra helping hand from today, as a new First Homes initiative launches, promising up to 50% off new builds for people buying in the area they live or work in.
The First Homes initiative could save buyers £100,000 or more, with developers allowed to offer up to 30% off a portion of their affordable housing, which rises to 50% at the local council’s discretion.
The scheme is for first-time buyers and new builds only; households with a combined annual income of more than £80,000 – or £90,000 in Greater London – cannot apply.
It is aimed at those who already work or live in the area, including keyworkers such as NHS staff and those on the pandemic frontline.
Local authorities will be able to offer a bigger discount – either 40% or 50% – “if they can demonstrate a need for this”.
Any discounts claimed on the scheme will need to be passed on when the property is next sold, meaning the homes will always be sold below market value.
The government says this will keep the properties in the affordable mark for ‘several generations’.
“The scheme will support local people who struggle to afford market prices in their area, but want to stay in the communities where they live and work,” the housing ministry said.
There are also price caps of £250,000 or £420,000 in Greater London after the discount has been applied.
Those who can afford to buy a First Home without a mortgage will not be eligible.
The initial First Homes properties went on the market on Friday as part of the opening phase of an early delivery project in Bolsover, Derbyshire.
More new homes will be offered to first-time buyers under the scheme across the country in the coming weeks.
The government said it would be funding a further 1,500 homes which will come on to the market from the autumn, and plans to have “at least 10,000 homes a year being delivered in the years ahead, and more if there is demand”.
First Homes is the latest initiative aimed at tackling the challenges of getting on the property ladder and follows a government guarantee scheme for 95% mortgages.
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With the property website Rightmove putting the current average asking price for first-time buyers in Great Britain at £205,925, some buyers using the scheme could save £100,000 or more.
Robert Jenrick, the housing secretary, said: “First Homes will offer a realistic and affordable route into home ownership for even more people who want to own their own home.”
Two major building societies have said they will be backing the scheme.
Leeds Building Society, said: “We’re pleased to be supporting the First Homes scheme, which aims to help people realise their dreams of owning their own home.
“Leeds Building Society helps these customers through a range of mortgages, from traditional high LTV (loan to value) lending to affordable housing initiatives such as Shared Ownership.
Andrew Haigh, chief executive at Newcastle Building Society added: “We’re committed to delivering innovative ways to help first time buyers find affordable and sustainable ways to own their own home.
“We’re pleased to be one of the first lenders to support the scheme.”
See our full guide on how the First Homes scheme works and who qualifies for it, here.
The start of another house price boom?
Critics of the scheme have warned that it could have a counter effect on the market, driving up prices - including on rent - instead of keeping them low.
Some experts say that with demand for these cut-price homes likely to exceed supply, it could spark a scramble for properties and add more fuel to the house price boom.
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.”
There are also concerns it could eat into the current affordable housing supply.
First Homes will have to take up at least 25% of affordable housing quotas in future.
Are you having a new build nightmare? Tell us your story: emma.munbodh@mirror.co.uk
That has sparked fears that the scheme could end up reducing the amount of social housing or other homes for affordable rent, effectively driving up prices for those at the very bottom of the ladder.
Local Government Association spokesman David Renard added: “It is important that the First Homes scheme does not come at the expense of providing truly affordable homes for rent.
“Councils fully support the aspiration of people wanting to buy their own home and helping those that want to buy to be able to.
“Everyone has the right to live in a safe and secure home they can afford. However, not everybody is able to, or aspires to own their own home.
“Councils need to be able to ensure a mix of homes and tenures are available in their local area, including homes for sale, social homes and other affordable homes.”
What other government home ownerships are there?
- 95% Mortgages: The mortgage guarantee scheme allows first time buyers to purchase a home with only a 5% deposit.
The scheme will help to increase the supply of 5% deposit mortgages for credit-worthy households by supporting lenders to offer these products through a government-backed guarantee. - Help to Buy: Equity Loan: A government equity loan that supports first time buyers with a low interest loan towards their deposit.
- Shared Ownership: Gives first time buyers the option to buy a share of their home (between 10% and 75%) and pay rent on the remaining share.
Buyers can also increase their share of the property in manageable payments in what is known as 'staircasing'. - Help to Build: A scheme to help back self and custom made homes through lower deposit mortgages. Lowering the required deposit will free up capital, so people can build the home that they want and need whether it’s a commissioned. The scheme will provide an equity loan on the completed home, similar to the Help to Buy: Equity Loan scheme.
