First Homes scheme: save 30% when buying a house

New scheme aims to help local people get onto the housing ladder by offering properties at a discount.

What is the First Homes scheme?

The First Homes scheme is the latest initiative from the Government, aimed at making it easier for people to get onto the housing ladder by purchasing a property at a discount.

The scheme launched in June 2021 and sees participating properties sold for discounts of between 30% and 50% off their current valuation.

The idea is that these discounts are offered to local buyers, helping people purchase a property in the area in which they already live but which have been beyond their purchasing power previously.

Where can I find a First Home?

The discount that will be offered on a First Home is agreed in advance between the local council and the developer building the property.

While the minimum discount is 30%, councils can negotiate a bigger discount if they want to give local buyers more of a helping hand in purchasing the property.

This discount applies to future sales of the property too, meaning that future buyers will enjoy the same discount off the market value of your home.

There are regional differences to the maximum value of a property that can be bought through the scheme. For most of the country, you can’t buy a property for more than £250,000 ‒ after the discount has been applied ‒ through the First Homes scheme, though this cap jumps to £420,000 within Greater London.

The initial First Homes properties went onto the market in June, and were located in the Bolsover area in the East Midlands, with further sites due to launch across the country. According to the Government, around 1,500 will enter the market from this autumn, with the idea that at least 10,000 First Homes will be delivered each year in future.

The scheme only applies to England, so you won’t be able to bag a First Homes scheme discount in other areas of the UK.

Who can use the First Homes scheme?

As the name suggests, in order to qualify you need to be a first-time buyer. This scheme isn’t going to be available if you already have a property registered in your name.

There is also eligibility criteria to meet in terms of your annual salary.

Whether you’re buying on your own, with a partner or friend, the combined annual household income of the purchases has to be less than £80,000. This rises to £90,000 for purchases within Greater London.

You can’t buy with cash either. If you’re purchasing a first home, then you need to have a mortgage (or a home purchase plan for Muslim buyers) which covers at least half of the discounted purchase price.

Importantly, these criteria will apply to future sales of a first home too. In other words, when the time comes to sell a property that you’ve bought through the scheme, you will only be able to sell to first-time buyers with salaries below a specific point. 

Inevitably, the fact that you are selling to a restricted base of buyers may make it trickier to shift than if you could sell it to anyone you like.

How can I buy a First Home?

Developers will have to detail which properties on their developments will be available under the scheme.

You will then need to apply through the builder in order to purchase the property at the promised discount. 

Currently there isn’t a central place to check which developers are offering these properties, but hopefully this will be launched once the scheme is properly up and running with more homes to choose from.

Finding a First Home mortgage

Mortgage lenders have made positive noises about the First Homes scheme, but there haven’t been any dedicated mortgages launched for people buying through the scheme.

Instead it seems that you will be able to make use of a regular mortgage from whichever lender you choose.

We do know one lender who is definitely keen on the scheme though ‒ Leeds Building Society has announced that it received the first application from a buyer looking to use the scheme, and has now made an offer to the borrower.

Alternative schemes for first-time buyers

There is no shortage of schemes and initiatives in place to help people purchase a property.

Last year the Government launched a mortgage guarantee scheme, where it takes on the risk that comes from lenders offering mortgages to borrowers with only a 5% deposit.

As building a deposit is one of the biggest barriers first-time buyers face, the idea is that the scheme will mean more lenders offer deals at 95% loan-to-value, helping them purchase with a smaller deposit in place.

There is also the Help to Buy scheme, another option for those hoping to buy with a small deposit.

Under the Help to Buy scheme, the Government supplements your deposit with a 20% equity loan that you don’t have to pay back for five years. You then take out a mortgage for the rest needed in order to complete the deal.

In theory, the Help to Buy scheme is closing next year, but given it has been extended before it wouldn’t be a huge surprise to see it continue in some form.