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    First Homes Scheme Unveiled: A Guide for Prospective UK Buyers

    By The reallymoving Team Updated 4th Apr, 2024

    A look at the First Homes scheme and what it could mean for the property market moving forward.

    First Time buyers can take advantage of a 30% discount to buy new-build property under the Government’s new First Homes scheme. 

    Launched on June 4, the scheme follows a decade of other measures introduced to help First Time Buyers get on the housing ladder: Help to Buy, Shared Ownership, Starter Homes, and the 95% mortgage guarantee scheme introduced in April.  

    What does the scheme offer? 

    The First Homes scheme offers a 30% discount for First Time Buyers on new-build property in England.  

    According to the government, users of the scheme could save approximately £100,000 on the price of an average new-build property. 

    In more expensive areas, where getting on the housing ladder can be more difficult, local authorities have been given powers to require a minimum discount of up to 50% compared to the market price. 

    One of the selling points of the scheme is that the discount is available to other First Time Buyers if the house goes on sale in the future.  

    The scheme is aimed at key workers, such as nurses and teachers.  

    One criticism of the current housing market is that it pushes key workers out of major towns and cities because prices are too unaffordable. 

    The Government insist the scheme is designed to support local people eager to stay in the communities where they live and work, but find it difficult to afford the high house prices. 

    Under the scheme, local councils can prioritise key workers and set a local connection test to determine who should be prioritised based on the needs of the local community. 

    Housing Secretary Robert Jenrick said: “Enabling more people to buy their own homes is at the heart of the mission of this government, and First Homes will offer a realistic and affordable route into home ownership for even more people who want to own their own home. 

    “Thanks to First Homes, we will offer more homes to local people and families, providing a route for first-time buyers to stay in their local areas rather than being forced out due to rising prices.” 

    The first homes to be part of the scheme have gone on the market in the East Midlands. Further sites are set to be launched throughout England over the coming weeks.  

    The Government plans for another 1,500 homes to enter the market from autumn, with a target for 10,000 homes a year in the years ahead – and potentially more if demand is high. 

    Major lenders, including Halifax and Nationwide, as well as local building societies and community lenders, have already confirmed their intention to offer high loan-to-value mortgages against First Homes to support the scheme’s rollout.  

    The Government has pledged to build a million new “affordable” homes in this Parliament to help make home ownership achievable for more people. 

    Who is eligible? 

    Only First Time Buyers can take advantage of the scheme. 

    Households with a combined annual income of more than £80,000 – or £90,000 in Greater London – are unable to apply.  

    Local councils can also add their own requirements, such as prioritising key workers or local people. 

    Those who can afford to buy their first home without a mortgage won’t be eligible, and the Government insists there are measures in place to prevent people purchasing the properties solely as an investment. 

    There are price caps, too – once the discount has been applied, the buyer shouldn’t pay more than £250,000, or £420,000 in Greater London.  

    However, local councils can make the case for imposing lower price caps. 

    What was the reaction? 

    Tim Bannister, director of property data at Rightmove, said there’s likely to be a scramble for properties under this scheme as they become available.  

    “Especially as we’ve already seen an influx of first-time buyers enter the market recently, helped by more lower deposit mortgages being available,” he said. 

    Some fear this could cause demand for the homes to outstrip supply, pouring more fuel on the house price boom and make houses more unaffordable than they are now.  

    However, many local building societies are positive about the scheme.  

    Robin Fieth, chief executive of the Building Societies Association, said: “Building societies, both large and small, are pleased to be among the first lenders to offer mortgages in support of this new product.” 

    He added: “Councils will also be able to prioritise the homes for key workers such as nurses and teachers who have been looking to get on the housing ladder while supporting their community throughout the pandemic.” 

    Richard Fearon, chief executive of Leeds Building Society, said: “We’re pleased to be supporting the First Homes scheme, which aims to help people realise their dreams of owning their own home.” 

    He added: “We’ve experienced some of our busiest ever months for home purchase in 2020 and so far in 2021.” 

    David Postings, chief executive officer of UK Finance, said that key workers have kept the country running during the pandemic and deserve to be helped, along with other local first-time buyers across England, in realising their dreams of owning their own homes. 

     “Our commitment is shared across all necessary stakeholders, as underscored by the high level of co-operation between lenders, government, local authorities and developers in helping drive the First Homes scheme forward,” he said.  

    However, some have argued that many of the homes will remain unaffordable for first-time buyers, especially in London and the South-East. 

    The average price in the capital now stands at over £500,000, which means a First Homes property with a 30% discount would still come in at around £350,000. 

    As a result, this would likely not be affordable to the average London earner, who takes home around £26,000-£28,000 per year.  

    Meg Hillier, Labour MP for Hackney South and Shoreditch and chair of the public accounts committee, said: “The government has run at our housing crisis from every angle except the one that counts: supplying suitable homes for families now.  

    “There must be real questions about why First Homes will work any better.” 

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