The government’s recently announced ‘Your First Home’ program has generated significant interest in the mortgage and housing markets.
The 2.5% deposit requirement, coupled with a government-backed equity loan of up to 20% of the property value, has the potential to make homeownership achievable sooner for many ambitious first-time buyers who struggle to save a traditional deposit.
At Yorkshire Building Society, we have long called for a meaningful successor to Help to Buy and welcome the Government’s ambition to tackle one of the biggest barriers to home ownership.
However, for brokers, lenders and our clients, the eye-catching deposit number is just the starting point. The success of your “first home” will depend not on the title, but on the details.
As things stand, there are still important unanswered questions about how affordability is assessed, how an equity loan will perform over time, and what happens when customers want to remortgage, pay off the loan, or move home.
The original Help to Buy program demonstrated the positive impact that targeted government intervention can have. It has helped many people buy a home earlier than they otherwise would have, supporting housing market activity during a challenging period.
But it also highlighted the importance of careful design. The challenge for ministers now is to create a plan that not only expands opportunities for sustainable home ownership, but also helps get the housing ladder moving again.
This broader goal is important. Through the recently published YBS No going home? Restoring the housing ladder in Britain Research We have consistently argued that the UK housing challenge is not just about helping more first-time buyers buy a property. It’s about restoring a functioning housing ladder, where people can take their first step into the market and continue to progress through it as their circumstances change.
For brokers in particular, one of the most important considerations is understanding the customer journey after the initial purchase.
A lower deposit may help someone buy their first home sooner, but what happens when that borrower wants to remortgage, move house, pay off an equity loan, or borrow additional money in the future? These are the practical questions that clients expect their advisors and lenders to be able to answer.
Affordability assessments will also be crucial. While reducing the deposit hurdle is welcome, customers should still be able to afford their mortgage repayments comfortably over the long term. Brokers and lenders will want to be clear about how an equity loan will be treated within affordability calculations and what financial liabilities borrowers could face as the scheme matures.
The way lenders integrate the scheme into their product suite will also be important. A successful scheme should support a competitive mortgage market rather than creating unnecessary complexity or limiting future choice. Borrowers need to have confidence that they will still have reasonable options when it comes to remortgaging, switching products or moving home.
This is where continued engagement between government, lenders and the intermediary sector will be essential. Through Accord Mortgages, we see first-hand the critical role brokers play in helping clients navigate increasingly complex borrowing decisions. Their experience and vision should help shape the final design of your first home before you launch it.
There are also several policy details that will be of particular interest.
The government has already indicated that caps on household income and local property prices will form part of the scheme. This is reasonable, but it must be set at the correct levels. If boundaries are too restrictive, aspiring buyers who need support may be excluded. If set too high, there is a risk that aid will be diluted and not reach those facing the greatest affordability challenges.
We also believe that eligibility should extend beyond newly built properties. If the goal is to restore home ownership, policy must focus on getting the whole system moving again. Expanding eligibility would increase choice, create transactions across the market and help current homeowners move, opening up mobility across the broader housing market. The housing market must operate as a ladder, not as a series of separate rungs.
Equally important is transparency regarding the long-term operation of the equity loan itself. Buyers need a clear understanding of how the government’s share will be managed, how the payment mechanisms work, and what costs may arise in the future. The simpler and more transparent the arrangements, the more confidence customers, brokers and lenders have in the scheme.
The government deserves credit for recognizing that getting onto the housing ladder is becoming increasingly difficult, and for being willing to explore bold solutions.
Ambition beyond your first home is welcome. But if it is to deliver lasting benefits, ministers must now focus on ensuring that mechanisms work not just on day one, but throughout the entire new homeowners’ journey, while recognizing that first-time buyers form a vital link in a wider, interconnected chain, and doing everything they can to avoid unintended consequences such as further house price inflation.
Ultimately, success should not be measured by the number of equity loans issued or the size of the reduction in deposits. What is crucial here is whether more people who would otherwise be denied homeownership are able to afford a home, and whether the entire housing ladder starts moving again.
For brokers, lenders and most importantly clients, this is the score that really matters.
Tom Simpson, Managing Director of Homes at Yorkshire Building Society
