The government's new equity loan scheme in England, known as Your First Home, is likely to exclude most first-time buyers seeking three-bed homes in London and the south-east, according to research from Zoopla. The property site found that 51 per cent of first-time buyers want a three-bed house, compared with 18 per cent for a two-bed house and 13 per cent for a two-bed flat.
Zoopla modelled the likely local authority price caps, which will determine whether homes qualify for the scheme and are due to be announced in the coming weeks. It found that 70 per cent of new-build three-bed homes in the south-east would exceed the estimated caps. Richard Donnell, executive director at Zoopla, said the caps mean the scheme "doesn't really work for larger family homes, which is what many first-time buyers want." Across England, 37 per cent of new-build homes by corporate housebuilders would fall beneath the estimated caps.
The scheme allows eligible buyers to purchase new-build homes with a 2.5 per cent deposit, using a government equity loan of 20 per cent of the property's value. It is due to open to applications in February and launch in April. Donnell noted that first-time buyers have grown more ambitious in recent years as transaction costs and mortgage rates have risen, and that builders have shifted toward larger homes since Help to Buy ended in 2023.
Zoopla also found that repricing homes to fit within the caps would be costly, at around £9,300 for homes up to 5 per cent above a cap and £26,400 for those 5-10 per cent above. Builders must also pay a usage fee. Neal Hudson of Residential Analysts said the lengthy time needed to launch the scheme could add pressure on housebuilders already facing rising construction costs.
Source: Financial Times Companies · Summarized by HeadlinesBriefing