Money Wellness
Illustrated image of someone dropping keys into another person's hand. Mortgage help for first time buyers
category iconHousing
calendar icon22 Apr 2024

Radical change is needed to help first-time buyers

A new report from the Building Societies Association (BSA) has found that the ability to become a first-time buyer is increasingly dependent on the so-called Bank of Mum and Dad.

It also found that first-time buyers now need to have two incomes higher than the country average.

This means those without family help,  the single or those on lower incomes are being excluded from homeownership, with 32% of people surveyed saying that they want to buy a home but they don’t think they will be able to.

As a result of its findings the BSA is calling on the government to commit to working with lenders, the wider housing industry and the public, with the sole aim of making homes more affordable, more available and more appropriate to the needs of those living in them.

Commenting on the findings, Paul Broadhead, head of mortgage and housing policy at the BSA, said: “Becoming a first-time buyer is possibly the most expensive it has been over at least the last 70 years, but a properly functioning housing maker it dependent on first-time buyers being able to afford their first home.

“There is no silver bullet.. and it won’t be possible to help everyone who wants to become a homeowner in the current high price-to-income housing market. But there are many things that can help to fix a broken housing market. That starts with changes to regulations and support schemes that not only help today’s first-time buyers, but don’t fail future generations.”

There are lots of different mortgage schemes available to make it easier for first-time buyers to get the money together to buy their dream home. These schemes help in different ways from offering discounts to providing down payments or more favourable lending criteria.

What help is available if you’re a first-time buyer?

According to Pete Mugleston, MD and Mortgage Expert at, there are several different mortgage schemes available that make it easier for first-time buyers to buy their first home.

Shared Ownership
Shared Ownership schemes allow buyers to purchase a portion of a property (typically between 25% and 75%) and pay rent on the remaining share. This can reduce the upfront cost of buying a home, particularly in expensive housing markets.  Buyers can also increase their share of equity in the property up to 100%.

It’s important to note that only certain mortgage providers offer Shared Ownership schemes, and buyers must consider all potential additional fees before choosing this option.

Right to Buy
Right to Buy is a government mortgage scheme that allows most council tenants and some housing association tenants to buy the property they live in at a discount. Many providers even let borrowers put the discount towards the purchase meaning there’s no need to save for a deposit. How much discount buyers receive will depend on several factors such as property type, location, and value. Typically, the longer someone has been a council tenant, the greater the discount they’ll qualify for.

Buyers undergo the standard affordability and eligibility checks based on income and credit rating. If they have bad credit, are retired, or self-employed or the property has non-standard construction (such as thatched roofs or timber frames), they may need to seek assistance from a specialist lender.

The Mortgage Guarantee
The Mortgage Guarantee Scheme (MGS), also known as the ‘Mortgage Guarantee Program’, is designed to help first-time buyers who might struggle to get a mortgage because they’ve only got a small deposit. Instead of the standard 10-20% deposit, buyers may be able to access mortgage financing with a deposit as low as 5%. The government has encouraged 95% loan-to-value (LTV) by offering a ‘guarantee’ on a portion of any mortgage provided under it. This implies that they will assume some of the risk associated with the mortgage lender’s investment.

Help to Build: Equity Loan
The purpose of the Help to Build: Equity Loan is to make it easier for individuals and families to build their own homes by providing financial assistance and support, making building their own home a realistic option, even with a small deposit. The equity loan amount can range from 5% to 20% (or up to 40% in London) of the total estimated cost. If qualified, an individual can allocate up to £600,000 for their new home. This budget must cover the land cost, if not already owned, and no more than £400,000 for construction expenses.

The £5k Deposit Mortgage
This scheme was introduced by Yorkshire Building Society to help first-time buyers secure mortgages with smaller deposits of just £5,000 so they can buy a home valued up to £500,000.

With any potential mortgage scheme, we’d recommend first-time buyers gain expert advice from a mortgage broker throughout the application process to establish that they are borrowing within their means and accepting the best offer available to them for their situation.

Avatar of Caroline Chell

Caroline Chell

Caroline has worked in financial communications for more than 10 years, writing content on subjects such as pensions, mortgages, loans and credit cards, as well as stockbroking and investment advice.

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