First Homes Initiative - New Scheme Could Give First Time Buyers up to 50% Off

A new scheme has been introduced to help first time buyers get on the housing ladder. Buyers will be offered a discount of at least 30% (and up to 50% if there is local need) off the market price of a new build home.

While the scheme – called the First Homes initiative – is in its early stages, if there is demand, the aim is to deliver around 10,000 First Homes per year.

The government states that the scheme should allow more people to buy in their local area, particularly key workers such as NHS staff, delivery drivers and supermarket workers, who may otherwise be priced out of the area.

How will the First Homes initiative work?

Under the First Homes initiative, new build houses and flats in certain areas will be made available to local people and sold with a discount of at least 30% off market value. Local councils will also have the power to allocate discounts of up to 50% if necessary.

For example, a new home worth £200,000 could be sold with a discount of as much as £100,000 off.

Councils will be allowed to prioritise who gets a First Home, ensuring that key workers such as nurses and teachers can get on the housing ladder after supporting their communities through the Covid-19 pandemic.

Councils will be able to set their own ‘local connection tests’ to decide who should get a First Home based on the needs of the community.

The discount will also be passed on to future buyers when the owners of a First Home are ready to sell. For example, if a keyworker buys a First Home worth £200,000 with a discount of 30% (a purchase price of £140,000), then sells it 10 years later when it is worth £300,000, the new buyers can also get a discount of 30% (a purchase price of £210,000).

Who is eligible for the First Homes scheme?

You should be a first time buyer whose household annual income is no more than £80,000 (£90,000 in Greater London). You should have a mortgage or funding plan to fund at least 50% of the purchase price.

The property purchase price (after the discount) should be no more than £250,000 (£420,000 in Greater London).

How big a deposit do you need to buy a First Home?

Many mortgage lenders have announced that they will be offering high loan-to-value mortgages against First Homes in support of the scheme.

The First Homes scheme follows the recent introduction of the 95% mortgage guarantee scheme, whereby the government has agreed to back mortgages, encouraging lenders to bring more 95% products to the market and allowing first time buyers to buy with just a 5% deposit.

Where can you buy a First Home?

The First Homes initiative is currently in its first phase. At the moment, First Homes are only available in the Bolsover district, East Midlands.

In the coming weeks it is expected that the scheme will launch in other areas of the country and a further 1,500 will be available by autumn. If there is demand, the goal is to deliver at least 10,000 First Homes a year.

Will the First Homes scheme Work?

Many are cautiously optimistic about the scheme, particularly how it is aimed at helping workers buy in their local areas when they may otherwise be priced out.

However, there are still questions about how the scheme will work, including how properties will be valued and how mortgage advisors should deal with the scheme (as the discount aspect is focused on the property rather than the mortgage).

There are also concerns about mad rushes to snap up First Homes as they are launched, which could just end up pushing house prices up further and pricing people out who are unable to get a First Home out of the area.

That being said, if you are able to buy a First Home, it may work out cheaper than other home ownership schemes in the long run. For example, purchasing a Shared Ownership property often comes with additional costs, such as ground rent and service charges, on top of the mortgage costs.

Get expert advice about buying your first home

Our conveyancing solicitors are accredited by the Law Society for Conveyancing Quality. We can help you with all the legal aspects of buying your first home.

Request a conveyancing quote online or get in touch with us at your local Atkins Hope office in Croydon, Medway, Blackheath or Guildford.