Access Financial Services (Access FS) has called on the government to ensure its proposed Your First Home Scheme gives first-time buyers greater choice and a clear understanding of the longer-term financial implications of purchasing a new-build property with a small deposit.
Under the proposed Your First Home Scheme, eligible first-time buyers in England are expected to be able to purchase a new-build property with a 2.5% deposit, supported by a government-backed equity loan worth 20% of the property’s value.
The scheme is intended to reduce the deposit barrier and initially offer an interest-free period on the equity loan, with further details due at the Autumn Budget.
While Access FS supports measures to help more people onto the property ladder, the broker suggests the scheme’s restriction to new-build homes needs careful consideration, given evidence that buyers who resell newly built properties within a few years are more likely to sell for less than they originally paid.
Research by Kerblist, analysing HM Land Registry data for England and Wales, found that 12% of new-build homes resold within three years sold for less than their original purchase price, compared with 6.3% of comparable second-hand homes.
Access FS says this highlights the importance of ensuring first-time buyers understand the potential risks of purchasing a property, particularly when they have limited savings and may need to move again sooner than expected.
To allow buyers greater choice and the opportunity to consider homes that better suit their circumstances and local housing market, Access FS urges the government to widen the scheme so it can be used on existing properties as well as new builds.
Access FS founder and chief executive Karl Wilkinson says: “Helping first-time buyers overcome the deposit barrier is important, but getting people onto the property ladder is only part of the challenge. We also need to make sure they understand the financial commitments they are taking on and how these could affect them further down the line.”
“Research shows that new-build properties resold within three years are more likely to sell for less than their original purchase price than comparable second-hand homes.”
Wilkinson adds: “Opening the scheme to existing homes would give first-time buyers more choice, while independent mortgage advice can help them understand how the mortgage and equity loan work together, including the implications of selling the property or reaching the end of the interest-free period.”
“The Government has an opportunity to help more people buy their first home, but the scheme needs to support informed decisions as well as access to finance. Buyers should have a clear understanding of both the immediate benefits and the longer-term commitments.”
