Earnings limit of up to £140K for first-time buyers loan scheme

The Your First Home scheme will limit household earnings for the first time. Households must earn less than £110,000 to qualify outside London, or less than £140,000 for homes bought in London. The government says this should target support more carefully than earlier schemes.

The limits were reportedly revised upwards. Ministers first considered £90,000 outside London and £110,000 in the capital. They then concluded that lower ceilings could exclude too many middle-earning couples, including teachers and nurses.

The limits were expected to be confirmed at the Budget next week. The scheme will apply to qualifying new-build homes in England bought from participating developers. It is designed to help buyers with smaller deposits, while avoiding unrestricted access for relatively wealthy households, which critics said had helped push up house prices under earlier programmes.

The scheme can provide an equity loan worth 20% of a qualifying new-build property's purchase price. It is backed by the government and available through participating developers in England. The support is intended to make buying possible for first-time buyers who struggle to save a large deposit.

For example, a buyer could put down a deposit as low as 2.5%, while the government-backed equity loan covers 20% of the property price. The remaining amount would need to be covered through the buyer's other borrowing and funds. The loan will also have an initial interest-free period.

The article does not give a maximum property price or a maximum cash value for the loan. The scheme is still being set up, and ministers had not yet provided full details about its funding. Developers will also be asked to contribute towards running costs.

A government-backed equity loan helps fund a home purchase in return for being linked to the property's value. In this scheme, the loan is worth 20% of a qualifying new-build home's price. It is backed by the government, and the initial period is interest-free.

An ordinary mortgage is normally a loan that the buyer repays under agreed borrowing terms. Its balance is generally set by the amount borrowed, plus interest and repayments. An equity loan works differently because the amount owed is connected to changes in the home's value. The buyer still needs a deposit and other borrowing to complete the purchase.

That structure can make the upfront deposit smaller, potentially as low as 2.5%. However, the article does not explain every repayment rule for Your First Home. It does state that, like Help to Buy, the equity loan will be linked to property-value changes.

The key feature of an equity loan is that its value follows the home. If the property becomes more valuable, the amount needed to repay the equity loan increases in line with the relevant share. If the property loses value, the amount owed decreases in line with that share.

For example, if a loan represents 20% of a property's purchase value, repayment is linked to 20% of its later value. A rising price can therefore create a larger repayment than the original cash advanced. A falling price can reduce the repayment amount. The article describes this mechanism for Help to Buy and says the new scheme will work similarly.

This differs from borrowing a fixed cash sum through an ordinary mortgage. The article does not provide a detailed repayment example or specify all sale and repayment rules for Your First Home. It does confirm that the equity loans are linked to property-value changes and initially interest-free.

The government is offering the scheme because some first-time buyers cannot easily afford a home deposit. A government-backed equity loan of 20% could allow a deposit as low as 2.5%. Income limits are intended to direct this support towards households below the stated thresholds rather than relatively wealthy buyers.

The scheme is also meant to boost housebuilding. Participating developers will sell qualifying new-build properties, and the government expects the programme to support demand for those homes. Developers will be asked to contribute towards running costs. The Home Builders Federation welcomed the plans and urged ministers to establish the scheme quickly.

This building goal matters because ministers conceded they are set to miss a target of 1.5 million homes in England by the next election. The Conservatives called the plan a failure of Labour's housebuilding record and warned that a new developer levy could raise new-home prices. Full funding details remain outstanding.

Your First Home is aimed specifically at first-time buyers and uses household income limits. Help to Buy, which initially ran from 2013 to 2021, allowed all home purchasers to put down a 5% deposit on a newly built home worth up to £600,000. The newer scheme is therefore more targeted.

Both programmes use equity loans. Under Help to Buy, up to 20% of the home's cost was funded through a shared equity loan, interest-free for the first five years. Your First Home will also offer a 20% government-backed equity loan, with an initial interest-free period, and could allow deposits as low as 2.5%.

A second Help to Buy version ran from 2021 to 2023. It restricted access to first-time buyers and introduced regional price caps. Your First Home has stated earnings limits and applies to new-build homes in England bought from participating developers, but the article gives no property price caps.

House prices set the total amount a buyer must fund. When prices are high, a given percentage deposit requires more cash, and the buyer usually needs more mortgage borrowing. A shortage of homes can contribute to pressure on prices. More building, which the government hopes to encourage, could affect that wider balance, although the article does not predict the result.

Deposits provide an upfront contribution. A smaller required deposit can help a household buy sooner, but it leaves more of the price to be financed. Your First Home could reduce the deposit to 2.5% by adding a 20% government-backed equity loan. The remaining purchase cost would still need other funds or mortgage borrowing.

Mortgage borrowing determines how much of the balance a buyer can finance and repay. Income limits determine who can access this particular support, not whether every home is affordable. The article links earlier unrestricted support with criticism that it stoked prices, showing why both demand and supply matter.