As Help to Buy is reborn, will Labour’s First Homes plan work – and could it revive the property market?

Help to Buy is on the way back as Andy Burnham confirmed in his Labour Party conference speech this week. 

More details of the almost-identical new scheme for first-time buyers, to be called Your First Home, will be unveiled in this month’s Budget.

The Conservatives’ flagship scheme, which was withdrawn in 2023, had its detractors. Yet it assisted more than 300,000 people to climb on to the housing ladder.

As a result, the Prime Minister’s heartfelt description of a home of your own as ‘an essential everyone needs for a good life’ has generated considerable interest. 

Back in the 1990s, the average age of a first-time buyer was 29; today it is 34, according to Skipton Building Society.

Some also believe that Your First Home – for which registrations open at the end of the year – could reinvigorate the sluggish property market. So, could Burnham’s big idea be a winner? We answer your questions.

On the ladder: Labour’s Your First Home scheme replaces the Conservatives’ Help to Buy

HOW WILL THE SCHEME WORK?

First-time buyers in England will be able to acquire a new-build property, with a deposit of just 2.5 per cent – the Help to Buy minimum was 5 per cent. 

The Government will lend them a further 20 per cent interest-free for a set period, meaning that they will require a smaller mortgage. First-time buyers typically take out a 95 per cent loan.

Aneisha Beveridge, from estate agents Hamptons, explains: ‘The new scheme won’t be a silver bullet – but saving a deposit has become the biggest hurdle for first-time buyers.’

The price of the average first-time buyer property is £228,000. Under the Your First Home plans, you would need to put down £5,700, take an equity loan of £44,460 and arrange a mortgage of £177,840.

Say you opted for Halifax’s current 4.34 per cent two-year fixed-rate first-time buyer deal, the monthly repayment would be £884. The average monthly UK rent is now £1,393. 

HOW MANY COULD BENEFIT?

According to some estimates, there may be 2.2million frustrated first-time buyers in Britain, stuck in rented accommodation, thanks to rises in mortgage rates and the difficulty in raising a deposit.

Beveridge says that, for the moment, the numbers that could apply for Your First Home are unclear, as this will depend on who will be eligible, the property price caps, and for how long the 20 per cent government loan will be interest-free. 

The Help to Buy equivalent was interest-free for five years.

Burnham has said that Your First Home will be for those who cannot call on the ‘Bank of Mum and Dad’. 

Could this mean that anyone who could borrow, or receive a gift from parents or grandparents, will be excluded? 

Last year, about 53 per cent of first-time buyers received a subsidy from this source; the total handed over was £11billion. 

WHAT HOME CAN YOU BUY?

Ending the construction slump and encouraging housebuilders to get shovels into the ground is one of the aims of the new scheme. 

The Government is increasingly scared that it will fall disgracefully short of its key manifesto pledge of 1.5million homes by 2029.

The cost and the type of homes that will be built will depend on the developers that participate in the scheme. Only those who pay a levy will be able to do so.

Concerns are mounting that first-time buyers in London and the South East could be shut out if the price caps are lower than the cost of properties in these locations. The average first-time buyer home in London costs £472,000.

James Moody, from London developer SevenCapital, welcomes Your First Home, which he thinks has the potential to promote further activity in the market.

But he adds: ‘We would urge ministers to be generous when setting the price caps, as young workers in London and the South East want to live in places that are within an affordable and a reasonable commute of the office.’ 

COULD THIS REVIVE THE MARKET?

A new independent report says Help to Buy represented ‘very high value for money’ with the Government netting about £2billion from repaid loans and interest. 

But critics, who claimed the scheme did little more than inflate house prices and enrich housebuilder bosses, say that the same will be true of Your First Home.

Accurate predictions about the likely impact of Labour’s scheme will be easier to make when Chancellor John Healey tells us more. 

But Your First Home could be a ‘positive’, says Tom Bill from estate agents Knight Frank, as a stimulus to demand in one part of the market may spread more widely. Shares in housebuilders bounced on news of the scheme, suggesting it could start to dissipate the gloom.

The traditional early autumn house price bounce has not materialised as this week’s data, from Nationwide, shows. 

Price growth slowed to 0.8 per cent last month, dragged down by worries about interest rates and larger energy bills.

This is bad for consumer confidence, the wider economy – and tax revenues. So, many hopes are now riding on Your First Home.