For many aspiring homeowners, the biggest obstacle to buying a property is not necessarily earning enough to cover the monthly mortgage payments. It is finding the money for a deposit in the first place.
For those without the financial backing of the so-called “bank of mum and dad”, getting a foot on the property ladder can feel increasingly out of reach.
Prime Minister Andy Burnham hopes to change that with a new Help to Buy-style initiative, Your First Home, designed to help first-time buyers purchase a new-build property with a deposit of just 2.5%.
Under the proposed scheme, eligible buyers would receive a government equity loan worth 20% of the property's purchase price, with an initial interest-free period. The aim is to reduce the upfront financial burden of buying a home while encouraging housebuilders to deliver more properties.
However, while the prospect of home ownership may become more accessible, financial experts are urging prospective buyers to look beyond the initial attraction of a smaller deposit and consider the longer-term implications.
Dina Bhudia, director and independent financial adviser, P2M Independent Mortgage and Insurance Advisers believes the initiative could make a meaningful difference to people who have the income and commitment to buy a home but lack the family wealth needed to fund a traditional deposit.
“Your First Home has the potential to improve access to home ownership,” she said, adding that it could be particularly valuable for those seeking financial independence without relying on parental support.
But she cautioned that the scheme's success should not be measured simply by the number of people who manage to buy a property. “It should also be measured by whether those buyers can sustain home ownership, build equity and remain financially secure over the long term,” she said.
A smaller deposit, but what about the long-term cost?
Under the proposed programme, income thresholds, limits on applicants' savings and property price caps would restrict access to those who genuinely need assistance.
For eligible buyers, a 2.5% deposit could significantly reduce the amount they need to save before purchasing a home. The government loan could also reduce the size of the mortgage required.
Yet Bhudia warned that buyers must understand the financial commitment they are taking on rather than focusing exclusively on how much easier it might be to purchase a property initially.
An interest-free period, she stressed, should not be mistaken for a permanently interest-free arrangement. Once interest becomes payable, housing costs could rise, potentially coinciding with other financial pressures, including childcare expenses, changes in employment or higher mortgage repayments.
There is also the question of how the equity loan would be repaid.
Depending on the final terms, repayment could be linked to the property's market value rather than simply the original amount borrowed. If a property increases in value, the amount needed to repay the government's share could rise too, reducing the equity the homeowner retains when selling or refinancing.
Buyers must also consider what happens if property prices fall, their circumstances change or they need to move earlier than expected.
Bhudia believes prospective homeowners should receive clear illustrations of the total borrowing costs, how interest could change over time, how repayments would work under different property price scenarios and what would happen at the end of the loan term.
“Clear terms, responsible affordability checks and transparent repayment arrangements will be essential,” she said.
Home ownership beyond the front door
Burnham said the initiative was intended to help younger people who were struggling to enter the housing market, particularly those unable to rely on family financial support. “Too many young people are struggling with housing, with many giving up hope on ever having a home to call their own,” he said.
“Your First Home will get them the keys to their own front door, and give builders the confidence to deliver the high-quality new homes the country needs.”
The programme is also intended to stimulate demand for new-build properties and encourage housing construction as the government seeks to support wider economic growth.
But increasing access to home ownership will only address part of the problem if the homes available remain unaffordable or buyers are left struggling with repayments further down the line. Bhudia said efforts to widen access to home ownership must go hand in hand with increasing the supply of genuinely affordable homes.
Ultimately, the promise of Your First Home lies in its potential to give people an opportunity they might otherwise struggle to achieve. But getting the keys is only the beginning.
As Bhudia emphasised, the objective should be to help people build financial security through home ownership, rather than simply get them through the front door.
