Housebuilders have seen shares surge higher after the Government announced plans for a new scheme designed to help first-time buyers in England onto the property ladder.
The Your First Home initiative was unveiled at the weekend and will give first-time buyers the chance to buy a new-build property with a 2.5% deposit, with the Government stepping in to lend them an extra 20% towards the cost.
Scheme details and Budget announcement
The full details will be outlined in next month’s Budget, including a household income cap and local property price caps, with the aim of ensuring the new support is targeted at those who need it.
People will be able to access equity loans with an initial interest-free period. Developers will also be expected to make a contribution when signing up to the scheme, to help cover costs.
Further details, including costs and implementation timelines, will be announced by Chancellor John Healey at the Budget.
Market reaction
London-listed builders enjoyed steep share gains on Monday morning when trading opened after the plans were unveiled, with Barratt Redrow leading the FTSE 100 Index higher with a 12% share gain.
In the FTSE 250 Index, Charles Church builder Persimmon saw shares jump 15%, while Bellway and Taylor Wimpey were both 12% higher and Vistry gained 10%.
Neil Wilson, UK investor strategist at Saxo, said: “It’s a big shot in the arm for housebuilders as much as first-time buyers, coming as the industry is severely pressured by surging mortgage rates and inflation.
“Juicing demand provides the incentive to get building, though we should note the plan includes price caps so only more modest homes can be bought.
“Nevertheless, whatever the finer details, this is an unambiguous win for the industry.”
Industry reaction
Richard Hunter, head of markets at interactive investor, said: “The housebuilding sector has been beleaguered by a raft of headwinds ranging from higher mortgage rates and strained affordability to a slow planning process for new homes.”
James Nightingall, founder of property search service HomeFinder AI, said: “The new-build sector was in dire need of an initiative that gets the market moving again.”
Richard Donnell, executive director at Zoopla, said: “A new, targeted equity loan would increase the buying power of first-time buyers, but the greatest impact on housing delivery will come if it is accompanied by more homes being built at the price points and in the sizes first-time buyers are looking for.
“The detailed price caps announced at the Budget will therefore be important in determining how much additional demand the scheme can unlock.”
Paul Turner, chief executive of new-build home warranty and insurance provider the National House Building Council (NHBC), described the new equity loan scheme as “a welcome boost for the industry”.
He said: “There is no one single solution to the housing challenge. Supply must also be addressed through accelerated planning reform and the easing of unnecessary regulatory burdens.
“What’s more, it’s vital to keep focus on maintaining quality in the construction of new homes.”
Nicholas Mendes, mortgage technical manager at John Charcol, said: “Your First Home is positive news for first-time buyers.
“The deposit remains the single biggest barrier to getting onto the ladder and bringing it down to 2.5% will make a real difference to those who can afford the monthly repayments but have struggled to save while paying rent.”
He said: “Buyers will need to go in with their eyes open.
“The scheme is limited to new builds, which often come with a premium over comparable existing homes, and the equity loan will ultimately need to be repaid, so buyers need to be clear on the terms before committing.”
Mr Mendes also highlighted other low or no-deposit options currently available for people looking to get on the property ladder, such as Skipton Building Society’s track-record mortgage and Accord’s £5,000 deposit mortgage.
He said: “The right route will depend on the buyer’s circumstances and the type of property they want, which is where speaking to a broker can make a real difference.”
