First-time buyer loan scheme to cap household earnings at £140,000

Households seeking to utilise the government’s new equity loan scheme for first-time buyers will face income restrictions, with eligibility capped at an annual earnings level of £110,000 for properties outside the capital. For homes purchased in London, the threshold is set higher at £140,000. These specific earnings limits are anticipated to be formally confirmed during the upcoming Budget, following initial reports that ministers are finalising the details of the programme.

The Your First Home scheme is designed to assist prospective buyers by providing government-backed equity loans covering 20% of the cost of new-build properties in England. These loans are intended to reduce the required initial deposit to as little as 2.5% of the property value. To make the borrowing more accessible, the loans will include an initial interest-free period. The initiative is restricted to new-build homes purchased from participating developers, distinguishing it from previous support measures that did not impose such income or property type constraints.

Ministers have adjusted the proposed income thresholds after initial plans to set limits at £90,000 outside London and £110,000 in the capital were deemed too restrictive. Officials concluded that the lower figures would exclude a significant number of middle-earning couples, including professionals such as teachers and nurses, from accessing the support. Prime Minister Andy Burnham previously stated that the scheme would target those who genuinely require assistance, aiming to address criticisms that earlier programmes inadvertently boosted house prices by enabling wealthier households to borrow more extensively.

The government argues that the initiative will also stimulate housebuilding activity. This stance comes after ministers acknowledged that they are likely to miss the target of constructing 1.5 million homes in England before the next election. While Labour has indicated that the scheme will be funded within existing government budgets, specific details regarding which other areas may see spending reductions have not yet been disclosed. Developers participating in the programme will be required to contribute towards the running costs of the scheme.

Reaction to the proposals has been mixed. The Home Builders Federation has welcomed the plans and urged the government to proceed swiftly with implementation. Conversely, the Conservative party has criticised the measures as a significant admission of failure regarding Labour’s housebuilding record. They have also raised concerns that the new developer levy could result in increased prices for new homes. The scheme utilises equity loans linked to property value changes, similar to the Help to Buy programme that operated between 2013 and 2023, which offered shared equity loans to buyers of new homes.