How to help first-time buyers in a challenging market

As a result, numerous schemes and incentives have been introduced in recent years to help first-time buyers get onto the property ladder, some more successful than others. So in the current climate, with purchases at an all-time low, what assistance is out there for first-time buyers today, and what could help them in the future?

Government schemes currently available in England (these can be slightly different in Wales, Scotland and Northern Ireland) include:

Help to Buy: Mortgage Guarantee

Helps first-time buyers who only have a 5% deposit. The scheme runs up until June 2025. It works by compensating the lender against a portion of their losses if they needed to repossess the property. The scheme aims to encourage more lenders to offer 95% loan-to-value mortgages.  

Shared Ownership

This scheme allows the borrower to buy a share (usually between 25% and 75%) of a property and pay rent on the remaining share. Over time, they can increase their ownership (a process known as "staircasing") until they own the property outright.

Lifetime ISA (LISA)

First-time buyers can use a LISA for a property costing £450,000 or less, or to save for later life. The borrower must be aged between 18 and 39 to open a LISA and they can put in up to £4,000 each year, until the age of 50. The government will add a 25% bonus to the savings, up to a maximum of £1,000 a year.

Two first-time buyers purchasing a home together can combine their LISAs to buy the property.

First-time buyers’ relief - Stamp Duty

First-time buyers purchasing a residential property can claim relief if the property is intended be their main residence, and the purchase price is no more than £625,000.

They will pay:

0% on the first £425,000

5% on the remainder up to £625,000

These are the main types of help with getting a mortgage offered by the government to first-time buyers and they each have their own pros and cons. When it comes to mortgages there is not a ‘one size fits all’ solution, and it’s important to know the details of each scheme when advising clients.

There is currently a lot of focus on the Spring budget and what measures may be introduced to help stimulate the market. There have been rumours of some kind of a 99% loan-to-value mortgage scheme. While this could help people struggling to save for a deposit, given the impact higher interest rates have on affordability, the devil will be in the detail, and it will be interesting to see if and how such a proposal unfolds.

Some are also calling for another Stamp Duty holiday (on top of the current first-time buyers’ relief). While the last one proved very popular during the Covid period and certainly got the market moving, also helped increase house prices and therefore priced out yet more first-time buyers.

Many lenders are looking to help first-time buyers. Examples include Generation Home and their income booster and deposit booster, Metro Bank’s recent expansion of its joint borrower, sole proprietor proposition and Skipton Building Society’s 100% mortgages for renters. Such innovation in mortgage products and lender criteria is always welcome, and we would like to see more of it.

But until serious housing reform makes property purchase more affordable for first-time buyers, as advisers we will need to keep up our lender knowledge and CPD around government initiatives. And do keep an eye out for the Spring Budget announcements on 6^th March.