First-time buyers could be subject to household income limits under the government’s proposed Your First Home scheme, according to a BBC report. The scheme is intended to help people buy participating new-build properties in England with deposits as low as 2.5%.
The reported limits are household earnings of less than £110,000 outside London and less than £140,000 for homes bought in London. However, these figures are not yet confirmed in the source material. The BBC reports that ministers are expected to confirm them at next week’s Budget.
That distinction matters. Until the government publishes the final rules, prospective buyers cannot assume that they will qualify, that a particular property will be eligible or that the scheme will be available on the proposed terms.
How the proposed scheme could work
The Your First Home scheme is expected to provide government-backed equity loans worth 20% of the price of qualifying new-build homes in England. The loans would be available through participating developers and would initially be interest-free for a period, according to the BBC report.
If the proposal goes ahead as described, a buyer could therefore need a deposit of 2.5% rather than the larger deposit often required without additional support. The equity loan would make up part of the purchase price, with the buyer financing the remainder through a mortgage and their own deposit.
However, an equity loan is not the same as a grant or a permanently free contribution. The BBC says the loan would be linked to changes in the value of the property. That means the amount repayable could be affected by what happens to the home’s value, subject to the final terms.
The report does not set out all the information buyers would need before making a decision. This includes the precise interest-free period, what charges could apply afterwards, how repayment would work, whether there would be restrictions on selling or remortgaging, and how lenders would assess the equity loan alongside the main mortgage.
Why the income limits are important
Earlier first-time buyer support schemes did not impose income limits, but attracted criticism that they could help relatively wealthy households borrow more and potentially add to house-price pressure. The proposed limits appear designed to focus assistance on households that the government considers more in need of support.
At the same time, the reported thresholds are high enough to include some middle-earning couples. The BBC says ministers considered lower limits before deciding that these could exclude households such as teachers and nurses.
Income eligibility would not by itself guarantee that a buyer could obtain a mortgage. Mortgage lenders still assess income, regular spending, existing commitments, credit history, deposit and the property being used as security. Their affordability calculations and lending criteria would remain relevant even if a buyer met the scheme’s income threshold.
Our guide to first-time buyer mortgages explains the wider factors that can affect an application, while our guide to how much you can borrow covers why salary is only one part of a lender’s assessment.
New-build properties and housebuilding
The proposal is limited to new-build homes in England bought from participating developers, rather than existing homes across the wider housing market. The government has also argued that the scheme could support housebuilding by creating demand for new homes.
Developers taking part would reportedly be asked to contribute towards the scheme’s running costs. The Home Builders Federation has welcomed the proposal and called for it to be introduced quickly. However, the BBC also reports concerns from opposition politicians that a developer levy could increase the price of new homes.
These competing arguments underline an important uncertainty: a scheme that makes it easier for some buyers to meet a deposit requirement may not make homes more affordable overall if prices, mortgage payments or other buying costs remain high.
Buyers should also remember that the scheme, as reported, applies only to participating developers and eligible properties. The final property price limits, regional rules and other conditions have not been provided in the source material.
What prospective buyers should check
Anyone considering the proposed scheme should wait for the government’s final announcement and read the eligibility rules carefully. Key questions are likely to include:
- How household income will be calculated and whose income will count.
- Whether the London threshold applies according to the property’s location and how London boundaries will be defined.
- Which developers and properties will participate.
- Whether there will be maximum property prices or other regional limits.
- How long the equity loan remains interest-free and what happens afterwards.
- How the equity loan affects the total amount repaid and future sale or remortgage decisions.
- Whether buyers must be first-time buyers under a particular definition and whether any household circumstances are excluded.
It is also important not to treat a small deposit as proof that a purchase is affordable. The mortgage payment, the equity-loan terms, service charges on some new-build properties, household bills and the costs of buying all need to be considered together.
Our guide to ways first-time buyers may approach a smaller deposit sets out broader considerations, but no scheme or mortgage route guarantees approval.
What happens next
The reported income limits and other details remain proposals until confirmed by the government. The Budget is expected to provide the next major update. Until then, buyers should avoid making financial commitments on the assumption that the scheme will operate exactly as reported.
Once the final rules are published, the most important comparison will be between the complete cost and restrictions of the equity-loan arrangement and the alternatives available to the individual buyer. That assessment should include the main mortgage, the deposit, any future equity-loan costs and the possible effect of changes in the property’s value.
