A new government-backed scheme - called the First Homes Initiative - has been launched, which will help first time buyers to get on the housing ladder.
Under the scheme, buyers will be offered a minimum discount of 30% (or up to 50% if there is local need) off the market price of a new-build home. The government has claimed that the aim of the scheme is to deliver around 10,000 First Homes per year.
The scheme is being introduced to provide more first-time buyers with the opportunity to buy in their local area. This includes key workers such as NHS staff, delivery drivers and supermarket workers, who may otherwise be priced out of the area.
What is the First Homes Initiative and how will it work?
The First Homes Initiative will see new build houses and flats in certain areas become available to local people and sold with a minimum discount of 30% off market value. The option to allocate an additional discount of 50% will be delegated to local councils.
For example, a home worth £250,000 could be sold with a discount of as much as £125,000.
Local councils will be able to prioritise who gets a First Home and set their own ‘local connection tests’ which are designed to narrow down who should be prioritised based on the needs of the wider community.
The scheme also means that the discount is passed on to future buyers when the owners of a First Home are ready to sell. So, if someone buys a first home with a 30% discount, then later sells it, the new buyers will also be able to get a 30% discount on their purchase.
Who is eligible for the first homes scheme?
Anyone who is a first-time buyer and has an annual household income of no more than £80,000 (or £90,000 in Greater London), will be eligible for the scheme. You should also have a mortgage or funding plan that finds at least 50% of the purchase price.
The property itself should be no more than £250,000 (after the discount has been applied). This is raised to £420,000 in Greater London.
How big a deposit do you need to buy a First Home?
A number of mortgage lenders have already announced that they will be offering high-to-loan value mortgages against First Homes to support the scheme.
The scheme also follows on from the introduction of the 95% mortgage guarantee scheme, where the government has agreed to back mortgages and encourage lenders to bring more 95% products to the market.
Where is the First Homes Initiative operating?
The First Homes Initiative is in its first phase and is currently only available in the Bolsover district in the East Midlands.
It is hoped that, moving ahead, the scheme will launch in other areas of the country and a further 1,500 will be available by autumn. If the scheme is successful and demand is high enough, the goal is to deliver at least 10,000 First Homes each year.
Will the First Homes Initiative be a success?
Experts are cautiously optimistic about the scheme, especially as it is seemingly aimed at helping key workers to buy in their local areas when they may have otherwise been priced out.
This does not mean that the scheme is not without its potential issues. There are question marks over how properties will be valued, and mortgage advisors will approach the scheme.
There could also be a rush to snap up First Homes as they are launched, which means that there is a chance they could push house prices up, pricing out people who cannot get a first home out of the area.
The First Home scheme may still work out cheaper than other home ownership schemes in the long run. For example, Shared Ownership properties often come with plenty of additional costs.
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