Chancellor John Healey has confirmed a new scheme to help first-time buyers in the Autumn Budget, announcing the Your First Home Scheme, a £4.7 billion equity loan initiative supporting 70,000 first-time buyers with up to 20% government equity loans.
Those eligible will benefit from a reduced deposit requirement and a five-year interest-free period, which will save the typical buyer "hundreds of pounds a month."
New ISA and LISA changes
Mr Healey also announced a new scheme to introduce a First Time Buyer ISA, replacing the Lifetime ISA. He pledged to remove the penalties imposed on Lifetime ISA savers when purchasing properties worth more than £450,000.
Addressing the House of Commons, Mr Healey said: "I'm announcing that a new First Time Buyer Isa will replace the Lifetime Isa, and from today, I am dealing with the LISA penalty.
"So if the home you want costs more than the limit, you will get back at least what you put in.
"And I'm going further: from next Spring, a new scheme for first-time buyers who don't have the bank of mum and dad behind them.
"Your First Home – an equity loan scheme, which I'm funding today with £4.7 billion of government-backed lending."
Industry reaction
Richard Donnell, executive director at Zoopla, described the changes as a "welcome boost" for the industry.
He said: "Today's Budget has delivered a welcome boost for first-time buyers and the home-building industry. Localised price caps set at what first-time buyers want to pay for new homes means the Your First Home scheme will have around half the impact of the old Help to Buy scheme.
"If local price caps are set at what first-time buyers want to pay for new homes, Zoopla estimates that over a third of new homes will be eligible for the Your First Home scheme, with up to 30,000, or one in 10, first-time buyers set to benefit each year. This will cost the Government around £1.5bn a year, so it looks set to run for three years based on the £4.7bn announced in the Budget.
"The income caps announced in the Budget are high enough to ensure all these homes are affordable with a 2.5% deposit assuming a 4.5x loan to income mortgage.
"When the scheme was announced before the party conferences, Zoopla saw an immediate 40% jump in searches for new homes at the prospect of support with an equity loan to buy new homes. The appetite for the scheme is there, but its success will depend on getting the price caps right to ensure enough homes qualify to make a meaningful difference."
