Boost your knowledge of the new homeownership scheme designed exclusively for first-time buyers, says Ian Wilson, head of Halifax Intermediaries.
How many homeownership schemes does it take to replace Help to Buy?
Nobody knows yet, but there are certainly plenty to choose from, each playing a part in filling the vacuum to be left by the government’s flagship scheme.
You already know about Shared Ownership, Right to Buy and the growing range of private sector homeownership schemes.
But you probably don’t yet have experience arranging a mortgage for the new First Homes scheme in England, which is still in its infancy.
It’s expected to grow over the next few years, giving you another tool in your belt to support first-time buyer clients.
And with first-time buyer house prices rising to an average £264,140 in 2021, every little helps.
What are First Homes?
First Homes are newly built homes exclusively available to first-time buyers.
Under the scheme, the buyer gets a minimum 30 per cent discount on a new-build property (up to 50 per cent at the discretion of local authorities and developers).
The discount stays with the property to benefit future first-time buyers and the local community. This means that, when your client sells it, they get the market value minus the percentage discount they received.
For example, if they buy a home valued at £200,000 with a 30 per cent discount under the scheme, they pay £140,000.
When they come to sell, if the property is now worth £260,000 for example, they sell it to the new first-time buyer with the same 30 per cent discount (now £78,000), so your client receives £182,000.
Who pays for First Homes?
The developer agrees to offer the discount as part of the sites affordable housing provision they agree with the local authority when granted planning permission. New sites will see a minimum proportion of the properties being sold as First Homes.
The discount is written into the property’s title as a restrictive covenant on the first sale and future sales.
How many First Homes are there?
First Homes have already been built on sites in Bolsover, East Midlands and Cannock, Staffordshire.
Now the government is supporting 1,500 homes to expand the pilot. These homes will complete by March 2023.
Once fully operational First Homes is expected to deliver at least 10,000 homes every year.
Ultimately, the scheme will be offered on a limited number of plots in most new housing developments and account for 25 per cent of affordable new homes.
Who can take one?
The scheme is exclusively available to first-time buyers with a household income of £80,000 or less (£90,000 in London), although some local authorities can set a lower income threshold.
First Homes are available on eligible properties in England up to £250,000 (after the discount), or £420,000 in London. Again, local authorities can also set lower price caps based on average first-time buyer incomes in their area.
This property price cap only applies to the first sale of a First Home, so the buyer can benefit from house price inflation.
The minimum deposit is five per cent and they must take a mortgage (or a home purchase plan) to cover at least 50 per cent of the purchase price.
Councils can apply extra criteria, such as requiring the buyer to have a local connection or be a key worker, or they can prioritise certain professions.
Mortgages on First Homes
Halifax is committed to supporting the government’s homeownership schemes.
We’ve already launched four First Homes products. They include a fee-free, two-year fixed rate at 2.12 per cent, and a five-year fixed rate at 2.13 per cent.
In our Green Homes range we also have versions of the mortgages above with £250 cashback if the property has an EPC rating of A or B.
A handful of building societies have also launched First Homes mortgages and we expect to see more lenders support the scheme as it grows.
What can brokers do?
Keep up to date with all of the homeownership schemes, including First Homes. The government site, Own your home, offers a useful overview of options in England.
You might not have any First Home developments locally right now, but this is likely to change as we move beyond the pilot of the scheme. So is now the time to talk to local builders and estate agents to find out where the new schemes will be?
Look at which lenders are supporting this sector and familiarise yourself with their products and criteria.
First Homes are never going to replace Help to Buy, but they could help fill the inevitable gap left by the end of the shared equity scheme.
Now’s the time to boost your knowledge of First Homes, the mortgages on offer and which of your first-time buyer clients it could help into their own homes.
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