The government has set out how it plans to structure the First Homes scheme to provide discounted homes for first-time buyers in England.
The First Homes policy was first announced in the Conservative party’s manifesto in November. It promises a 30 per cent discount for first-time buyers who, according to the government, will save around £100,000 on the price of an average new-build property in England.
In a consultation outcome published today (August 6) the government confirmed that under the scheme properties must be marketed and sold at a discount of at least 30 per cent below market value.
However, acknowledging that in some parts of the country property prices were “very high”, the government said local planning authorities will be able to require a higher minimum discount of up to 50 per cent on first homes built in their area.
The authorities will also be able to set specific ‘local connection restrictions’ to help local people on the housing ladder, however these should be restricted to three months after the property goes on sale to avoid houses remaining unsold.
After that the properties should be open to all first-time buyers across England at a 30 per cent discount.
Properties under the First Homes scheme will also be subject to a £250,000 price cap across England, while a higher cap of £420,000 will apply in London. Price caps will apply after the discount to all initial sales.
Local planning authorities will also be able to set lower price caps for the first three months of sale, as the government recognised that in some areas the caps “may not be an ideal fit for local housing market conditions and it may be challenging to target support for lower income groups where the price cap is high”.
In addition to caps on property prices, buyers looking to benefit under the scheme will be subject to household income caps of £80,000 across England and £90,000 in London. Again, local planning authorities will have the ability to set lower caps for the first three months of sale.
While the government intends to focus the scheme on first-time buyers “as a rule”, it said it recognised “compelling reasons for making allowances in certain, limited circumstances” to other buyers. It will publish a list of circumstances under which non-first-time buyers should be eligible in due course.
Impact on mortgages
Among the eligibility requirements set out by the government were that properties under the scheme should only be purchased with a mortgage or home purchase plan covering at least half of the purchase value.
Additionally, so that lenders can offer competitive rates on mortgage and home purchase plan finance, the government said a "mortgage protection clause" would be developed to provide “additional assurance” to lenders, including a waiver on the discount in certain circumstances if a property is repossessed.
Under the government’s plan, properties under the scheme will have a restrictive covenant against the title to ensure that relevant restrictions, including the original level of discount, are passed on to future buyers.