I know what it looks like when a government housing scheme genuinely changes someone’s life. I spent five years delivering Help to Buy at Homes England. I saw first-hand what happened when people who thought homeownership was out of reach were suddenly given a means to taking their first step onto the housing ladder, and the stability that brings.
So, I welcome the government’s new Your First Home scheme. The housebuilding industry is on life support and is in dire need of demand-side stimulus. It’s something I’ve been lobbying government for ever since the closure of Help to Buy. But today, is an equity loan the right intervention to help solve the fundamental issue that faces pretty much all first-time buyers – the deposit?
Under the new scheme, it appears that the government has taken this into consideration. Where Help to Buy required a 5% deposit, Your First Home only requires a 2.5% upfront sum. But, as we all know, this isn’t the only cost incurred by homebuyers. So, does this make new build homes more accessible? In short, yes. But only for some. We need to take a look at the numbers, to see why.
According to recent data, the national average new-build home in England in 2025/26 – excluding flats and apartments – was priced at £376,000. This figure spans all house types, with the average price of a semi-detached house being £332,100.
How much deposit does a homebuyer need to build to be able to afford to take part in the Your First Home scheme? We’re looking at a 2.5% deposit of £8,302, Stamp Duty Land Tax (SDLT), after first-time buyer relief of £1,605 – with those who qualify paying 0% on the first £300,000, and 5% on the remaining portion up to £500,000. Then there are additional purchase costs and fees, which average at around £4,000 – taking the total cost up to just under £14,000.
It’s also important to note that these figures are national averages. The average cost of a home in the Southeast of England is considerably more. The average in the Southeast is £438,700 and in London, it’s 548,200. Meaning homebuyers would need to save considerably more for that 2.5% upfront payment, which sounds reasonably achievable for many – outside London and the Southeast.
That’s until you start to consider the current situation of most first-time buyers. Those that have left the family home and don’t have the support of the Bank of Mum and Dad. They typically find themselves renting.
According to latest figures from the Office of National Statistics, the average percentage of income spent on rent in England is 36.3%. Shift the focus to the South and this becomes 44%, while in some boroughs of London it exceeds 50%. But this only tells part of the story.
The housing charity Shelter highlighted that households in the lowest income quintile spend, on average, 63% of their income on rent – compared to 17% for those in the highest income group.
So, when first-time buyers – who are usually under the age of 35, and on modest incomes – are paying so much towards rent and the cost of living, there’s very little left each month to save towards their dream home.
Your First Home – is it really the government’s most restrictive homeownership scheme, ever?
Until the full details are announced, we’re told that the scheme is limited to a 20% equity loan for first-time buyers only. And we expect there to be regional property price caps and regional income caps. Never before has a government homeownership scheme had so many restrictions in place. Why is that? We don’t have to look too far back in history to understand.
Help to Buy supported 388,000 home purchases, and it was the most successful scheme of its kind. The government’s independent evaluation found that around 15% of all new-build homes in England between 2013 and 2023 were attributable to it. And 46% of its customers said they wouldn’t have been able to buy without the scheme. That’s nearly 50% of those new homeowners, at the time, telling us that without government intervention, they wouldn’t have been able to own their own home. It’s a figure that we absolutely shouldn’t dismiss.
But that did come with a cost to government. At the height of the scheme, it was writing £5.5billion worth of interest-free equity loans a year. Over the life of Help to Buy, over £24billion in loans helped people to buy a new-build home – and to enjoy the many benefits that home ownership brings. By any stretch of the imagination, this is a phenomenal commitment to support a single industry.
Which brings me to my point. Whilst the government needs to be seen to be supporting the housebuilding industry, it can ill-afford to allocate so much public money to it, at a time when so many other areas require funding. The main scheme parameters announced within Your First Home are designed to support, but they actually restrict the scheme’s use – limiting the public funding allocated to the scheme. We will know more, over the next few weeks, how these caps will work in practice. And their likely impact on the scheme.
Possible restrictions of the scheme for SME housebuilders
Developers will be expected to contribute when signing up to Your First Home, to help cover costs, we believe. This is not the first equity loan scheme to include developer contributions. Homebuy Direct (2009-2011) and First Buy (2011-2013) both incorporated developer contributions – 15% and 10% respectively. Due to the size of payments required, these schemes were dominated by the major national housebuilders who had the financial capacity to fund such transactions. Over time, the housebuilders sold this debt on to third parties, in order to recover most of their capital.
So, this time around, the government can’t be seen to be favouring the national housebuilders at the expense of the SME housebuilders. So, we expect that the developer contribution required for Your First Home will be closer to 2.5% – to ensure the loan to value of the homebuyer mortgage will be 75%, so that they can benefit from improved interest rates.
A smaller deposit doesn’t necessarily mean affordability
This is where I believe that the government needs to be most careful with Your First Home. Reducing the deposit requirement is helpful for people who are close to being able to buy. But it does nothing for those unable to accumulate a deposit in the first place.
As I learned from Help to Buy, increasing someone’s purchasing power isn’t the same as creating genuine affordability. There’s no doubt an equity loan can help someone buy a home – evidence tells us that. The question is whether it reaches the people who genuinely can’t get onto the housing ladder without it.
That should be the test for Your First Home. Its success shouldn’t be assessed on how many loans have been issued, how many new-build homes have been sold and how much additional demand created. Instead, it should be based on how many new homeowners are there, who otherwise would have remained renters? And the even more important question is are they still financially secure years later?
The equity loan conundrum
It seems that Your First Home follows the same script as previous iterations of homeownership schemes. The government provides a 20% equity loan to a first-time buyer on the home of their choice. And that’s the key point – a home of their choice.
While the scheme is designed to incentivise new-build homes, the reason Help to Buy was so successful was that it allowed a homebuyer to choose their preferred home from any housebuilder, in an area they wished to live. No other government housing scheme provides that level of flexibility. But is increasing a homebuyer’s purchasing power the right use of public funds?
If you’re a housebuilder, the answer is absolutely. There’s no doubt the scheme will stimulate much needed demand for new homes, and housebuilders will benefit from the additional sales.
If you’re a mortgage provider, the answer is also yes. Mortgage lenders are de-risked as their total exposure is 75% of the value of the property, allowing them to lend on two areas they don’t typically favour – new build homes and first-time buyers. But the question is, who pays?
An equity loan isn’t cheap money. When the government’s equity share is linked to the value of the property, the amount that ultimately has to be repaid can increase if the property rises in value. We’ve seen this with Help to Buy.
According to the recent review of the scheme, the government generated a total profit of £1.74billion (£1.24billion in capital growth, and £500million in interest). This equates to a 10.4% return on the loans that have been repaid so far. So, who’s paying this? The homebuyer.
An equity loan that increases purchasing power in a constrained market will have one impact on house prices – an increase. Meaning the loan becomes more expensive to repay, as it’s linked to a percentage of the open market value of the home.
Then there’s the question of repaying the equity loan. Due to the five-year interest free period associated with the previous Help to Buy scheme, mortgage lenders did not consider this when assessing homebuyer affordability on their 75% LTV mortgage. Homebuyers were assessed based on standard affordability limits at four-and-a-half-times their annual income, on the proportion of the home the mortgage covered. So, what happens when homebuyers want to repay their equity loan?
Many have relied on the uplift in property values to refinance. However, if property values don’t significantly change during the initial interest free period, many homebuyers could find themselves trapped. They could end up unable to repay the equity by increasing the loan to value of their mortgage, as their income levels may not allow it.
This doesn’t make the model wrong, but it does make transparency essential. Someone buying their first home should understand, before they sign up, how the equity loan will be repaid, what happens when they sell or refinance, and how changes in the value of their home could affect the amount they owe. These aren’t technical details to be buried in the small print. They must be presented clearly to a first-time buyer, as they will determine the financial outcome of one of the biggest decisions they will ever make.
We need multiple housing solutions
I don’t believe that Your First Home is a bad idea. I’m an advocate for anything that supports more people to own their home. Helping first-time buyers and supporting the new-build market are legitimate and worthwhile objectives. It’s what we’re working towards to, at Own Homes. But I think we must resist the temptation to present it as the answer to Britain’s housing crisis. It isn’t.
We also need to provide viable routes to homeownership for what is a massive demographic unable to overcome the deposit hurdle, despite being able to afford the ongoing cost of ownership. They need different solutions, which should complement Your First Home and other schemes, rather than compete with them. Because if we are serious about increasing homeownership, we’ll need to provide a choice of viable routes.
Let’s judge housing policy by the people it helps
The debate around Help to Buy has sometimes become a debate about whether the scheme was good or bad. It did many things very well. The fact that 46% of its customers said they couldn’t have bought without it is powerful evidence of that.
But we should also learn from the people who remained excluded, and design housing policy more inclusively, with them in mind. Around the people who genuinely need it, rather than generating as many transactions as possible.
Imagine paying £1,400 a month in rent – the UK national average and comparable to a typical UK mortgage. Month after month, you’re demonstrating that you can afford a substantial housing payment. Yet you’re not able to reasonably save for a deposit and none of that money is building equity for you. You’re paying for a home, but not building ownership, long-term security or that really important sense of belonging that comes with having a place they can truly call your own.
Instead, these millions of people are expected to save tens of thousands of pounds on top of their existing housing costs. Then house prices move, rent increases again, the deposit target moves – and they remain renters. This is the problem that we need to solve.
A housing scheme isn’t successful because it produces a good set of statistic. Its success should be based on the lives it changes – when someone who thought they would never own their own home is handed the keys – and is able to afford it years later. To build their future around. This is where the real test of any scheme should lie.
About the author
Chris Lee founded Own Homes after seeing first-hand how hard it has become for people to move into homeownership. Having delivered Help to Buy, it became clear that many people can afford to own a home, but find it hard to save for a deposit while also paying rent and everyday living costs.That’s why he created Own Homes, to help people build a deposit and become homeowners, without having to wait to live in the home they want.
The views expressed in this article are those of the author and not necessarily those of Today’s Conveyancer.
