Mortgage expert advice to first-time buyers ahead of Budget Help to Buy announcement

UK Mortgage Centre founder explains what buyers need to know about the revived Help to Buy-style scheme and why the headline 2.5% deposit isn’t the whole story

With the Government preparing to unveil further details of its revived Help to Buy-style scheme in the upcoming Budget, first-time buyers are being urged to look beyond the headline figures and understand exactly what the new support could mean for them.

The new Your First Home scheme, announced by the Government last month, is expected to allow eligible first-time buyers in England to purchase certain new-build properties with a deposit of just 2.5%, alongside a government-backed equity loan of up to 20% of the property’s value.

The scheme is expected to include household income and local property price caps, with further details due to be announced at the Budget.

Ahead of the Budget, mortgage expert Sam Fox, founder of UK Mortgage Centre, is offering his advice to prospective homeowners on what the return of Help to Buy could mean, who could potentially benefit and, importantly, what buyers need to consider before committing to a property.

He said: “The announcement has generated considerable interest among first-time buyers who have struggled to build a traditional deposit, particularly those without financial support from family. The Government has positioned the scheme as a way of tackling the deposit barrier and helping more people onto the housing ladder.

“But buyers will need to understand the mechanics of an equity loan rather than viewing the Government contribution as simply a conventional loan.

“The headline figure of a 2.5% deposit is naturally going to grab people’s attention, and for some first-time buyers this could potentially make home ownership feel much more achievable.

“But buyers need to understand the full picture. The Government’s contribution is an equity stake in the property, so the amount that ultimately needs to be repaid can change depending on what happens to the property’s value.

“That is why I would encourage anyone considering the scheme not to make a decision based solely on the size of the deposit required. You need to understand the mortgage, the equity loan, the property you’re buying and the longer-term financial implications.”

Under the proposed scheme, the Government is expected to provide an equity loan equivalent to up to 20% of the property’s value, initially with an interest-free period. Unlike a conventional fixed loan, however, the equity element is linked to the property’s value. If the property rises in value, the amount required to repay the Government’s share can rise too.

The scheme is also expected to focus on new-build properties, meaning buyers will need to consider not only their mortgage affordability but also the availability and pricing of eligible homes.

For Mr Fox, professional mortgage advice will therefore be particularly important as the finer details of the scheme emerge.

He said: “There will undoubtedly be people who see this announcement and immediately think, ‘I only need a 2.5% deposit, so I can afford to buy.’

“But affordability is much more than the deposit. It’s about what you can comfortably borrow, what your monthly payments will be, what happens if interest rates change and understanding what your future obligations could be under the equity loan.

“The Budget should give us much more clarity, and that will allow buyers to start working out whether this is genuinely the right route for them.”

With the Budget expected to provide further details on eligibility, income limits, property price caps, costs and implementation, first-time buyers will be watching closely to see how the scheme could affect their route onto the property ladder.

Sam Fox and UK Mortgage Centre are available to provide expert commentary and practical advice on the revived Help to Buy-style scheme, including eligibility, deposits, mortgage affordability, equity loans and the key questions first-time buyers should ask before purchasing a new-build home.