As of 4th June 2021, the ‘First Homes scheme’ is now being piloted in Bolsover and will be rolled out across England from the end of June. The scheme will help local first-time buyers – many of whom will be key workers – onto the property ladder by offering homes at a discount of at least 30% of the market price.
That same percentage will then be passed on with the sale of the property to future first-time buyers so homes will always be sold below market value, benefiting local communities, key workers, and families.
The government aims to make 1,500 First Homes available by the end of Autumn 2021, with a further 10,000 homes a year being delivered in the future should there be the demand.
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Can I use the First Homes scheme?
Below is the eligibility criteria to qualify for the First Homes scheme:
1: First Time Owners
The scheme is only open to first-time buyers: a person will not be eligible if they have ever owned a property in the past. This also applies to inherited or gifted properties. So if you have never owned a property but the person you are buying with has, you won’t be eligible for the First Homes scheme.
2: Maximum Income
There are limits on your maximum income and the combined income of all buyers must not exceed £80,000 (£90,000 in London).
3: Price Cap
The First Homes scheme will only apply to low-to-moderately priced properties which means a maximum property price of £420,000 in London and £250,000 elsewhere. This is to benefit people on more typical incomes and to prevent opportunists getting massive discounts on very expensive homes.
Note: that the price cap applies after the discount is applied so a house that might sell for £500,000 outside London could sell at £250,000.
4: Local Connections
One of the more obscure rules surrounding the First Homes scheme is the requirement to have a ‘local connection’ with the area where the property is. Housing minister Robert Jenrick said, ‘[First Homes] will offer more homes to local people and families, providing a route for first-time buyers to stay in their local areas rather than being forced out due to rising prices.’ He also emphasised the importance of local key workers being able to buy these homes.
It’s not yet clear what will qualify as a ‘local connection’; it may be something as simple as having family in the area or working locally.
Each Local Authority will set their own criteria to determine who should be prioritised for the scheme, so criteria may vary from region to region. However, it’s expected that in all areas priority will be given to key workers such as NHS staff, police, firefighters, local retail staff and delivery drivers etc.
Local councils will also be responsible for the amount of discount given. 30% is the minimum but it can be increased to 50% at the council’s discretion. Being a key worker is likely to be a major factor when deciding.
5: ‘Pay It Forward’
All subsequent buyers of the property bought will receive the same percentage discount, not just the first. When a buyer comes to sell their First Homes home, they must pass on the same percentage discount that they received, and the buyer must also meet the eligibility criteria at the time.
If an owner cannot sell their First Homes property under the rules within six months, then they may be allowed to sell it on the open market, subject to an additional fee.
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Which Banks Are Taking Part?
The following banks and building societies have announced their participation in the First Homes scheme, agreeing to provide 95% loan-to-value mortgages for First Homes:
- Chorley Building Society
- Darlington Building Society
- Leeds Building Society
- Mansfield Building Society
- Nationwide Building Society
- Newcastle Building Society
Currently, First Home scheme properties are only available in Bolsover, Derbyshire, but the scheme will be rolled out across England from the end of June. The government has also asked developers to ring-fence 25% of all new homes built, so most parts of the country could potentially have some affordable homes in the near future.
There are some concerns that the scheme won’t go far enough in the highest priced regions such as London. The average home in london currently costs around £500,000, so even with the maximum 50% discount this means a price of £250,000. With the average (median) London wage being £26,300, this is still out of the question for many buyers.
Estate agent Savills estimates that just 12% of households below the earnings cap could afford a First Homes two-bed property in London (based on a 15% deposit and 4x income mortgage). But in other parts of the UK, the figures are more optimistic.
If you think you may be eligible for the First Homes scheme, talk to your conveyancing solicitor for more advice. Compare conveyancers and solicitors fees online today. Simply enter some basic details and our calculator will compare conveyancers and give you an extensive list of solicitors. If you need some help or advice our team is happy to help.