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

The UK government’s new first-time buyer loan scheme is expected to set earnings caps for buyers in England. According to reports from The Times, households will need to earn less than £110,000 to qualify, or £140,000 for homes bought in London, before the figures are confirmed at next week’s Budget.

The scheme, called Your First Home, is expected to offer government-backed equity loans worth 20% of new-build properties sold by participating developers. The loans will include an initial interest-free period and are intended to help first-time buyers raise deposits of as little as 2.5%.

The Times reported that ministers had first considered earnings limits of £90,000 outside London and £110,000 in the capital. The government then changed the plans after concluding that the limits would exclude many middle-income couples, including teachers and nurses.

Unveiling the plan at a Labour conference last month, Prime Minister Andy Burnham said it would focus on people who really need support. The government has said the scheme could help increase housebuilding, even though ministers have admitted they are likely to miss a target of building 1.5 million homes in England by the next election.

Labour has said the scheme would be funded from existing government budgets, but has not yet said which other areas could face spending cuts. Developers taking part are also expected to contribute toward running costs, and the Home Builders Federation welcomed the plans and urged the government to move quickly.

The Conservatives criticised the proposals, calling them a colossal admission of failure of Labour’s housebuilding record. They also raised concerns that a new developer levy could increase the price of new homes.

The Your First Home scheme follows the Help to Buy programme, which ran under the Conservative-Liberal Democrat coalition. That programme offered equity loans worth up to 20% of a home’s cost, with an interest-free period. The first version ran from 2013 to 2021 and allowed buyers to put down a 5% deposit on new homes worth up to £600,000. A later version ran from 2021 to 2023 and restricted access to first-time buyers and applied regional price caps.

Source: BBC Business.