What First Time Buyer Schemes Are There in 2024?

Many first-time buyers in 2024 will find themselves dreaming of owning their first home but unable to save the deposit. Zoopla reported that the average deposit paid by a UK first-time buyer for a 3-bedroom home in 2023 was £34,500 for a £240,000 home.

Fortunately, the UK offers various first-time buyer schemes designed to make homeownership more accessible and affordable. From government-backed initiatives to innovative mortgage products, these schemes provide valuable support to aspiring homeowners. In this article, we will explore some of the options available to first-time buyers in 2024:

The Lifetime ISA (LISA)

The Lifetime ISA is a savings account designed to help individuals aged 18 to 39 save for their first home or retirement and an account can be opened with as little as £1. Savers can contribute up to £4,000 per year, and the government adds a tax free 25% bonus on contributions, up to a maximum of £1,000 per year. You can pay into your account until the age of 50 and funds can be used towards a deposit on a first home worth up to £450,000. Conditions do apply if the money is withdrawn within the first 12 months of opening the account or if it is not used for buying a first home or retirement (with exceptions), with a 25% charge being applied in most cases. 

The Mortgage Guarantee Scheme

Introduced to support buyers with smaller deposits, the Mortgage Guarantee Scheme offers lenders a government-backed guarantee on mortgages with a loan-to-value (LTV) ratio of 95%. This allows buyers to secure a mortgage with a deposit as low as 5%, whilst providing assurance to the lender from the Government, thus making homeownership more achievable for those struggling to save a larger deposit.

To use the scheme you must be a first-time buyer or home mover in the UK, but must be buying a non new-build property up to the value of £600,000, with a repayment mortgage. One issue with this scheme is that not all mortgage lenders are part of it and with higher loan-to-value mortgages often come higher interest rates, which would mean your monthly repayments may be higher. The scheme is open until June 2025.

As an example, for an average UK property costing £285,000, a 10% deposit would be £28,500, but using the scheme, a 5% deposit would set you back just £14,250.

The First Homes Scheme

The First Homes Scheme offers newly built homes in England at a discount of at least 30% off the market price and sometimes up to 50%. Eligible first-time buyers and key workers can purchase these properties in their local area, providing an affordable route onto the property ladder, often in the area of your choice. This means a smaller mortgage and, in turn, a smaller deposit is needed. There are some criteria attached to the scheme. The home must cost less than £250,000, or £420,000 if you live in London and your household income must be no more than £80,000, or £90,000 if you live in London. The discount is retained on the property, ensuring affordability for future buyers, but this means that you will not benefit from the full increase in the value of your property over time. Essentially, this means that if you got a 30% discount, you will need to offer a 30% discount to any future buyers. One thing to note about this scheme is that finding a development is not as easy as looking on a property portal. Instead, you have to contact local developers to check if they are part of the scheme.

Shared Ownership

Shared Ownership allows buyers with a lower deposit or income to purchase a share of a property (usually between 25% and 75%) and pay rent on the remaining share. You can buy as little as 10% of the property and only pay a deposit on the share you buy. This scheme enables buyers to enter the property market with a smaller deposit and mortgage, making homeownership more accessible. An example is buying a 10% share of an average UK property for £285,000, which would need a deposit of £1,425 and a mortgage for £27,075.

To be eligible you must be a first-time buyer or not own a home and unable to purchase a home via traditional methods, with a household income of less than £80,000 or £90,000 in London.

Buyers can gradually increase their share of the property over time through a process known as “staircasing.” This scheme gives buyers the chance to build up equity in a property, whilst increasing their share of ownership over time. However, shared ownership homes are only offered by organisations such as housing associations and local councils and, when you sell, the housing association has the right to find a buyer if you do not own 100% of the property by that point. You will also only ever own your proportion of the property. As an example, if you own 20% of a £200,000 property (£40,000) and the value increases fot £300,000, you will only own 20% (£60,000) with the remaining equity being owned by the housing association.

Help to Build Scheme

The Help to Build Scheme provides access to low-deposit mortgages for self-build properties, helping aspiring homeowners, including those who are first-time buyers, to build their dream home from scratch. This scheme offers financial support and guidance throughout the self-build process, making custom-built homes a viable option for first-time buyers. Through the scheme, buyers can access an equity loan for between 5% to 20% (up to 40% in London) of the total estimated build cost. Once a self-build mortgage has been agreed with a lender, buyers can apply for the Help to Build loan and have 3 years from approval to buy a plot of land and build a home, with payments staggered throughout the stages of the build. 

With this scheme, the property must be used for residential purposes and must cost no more than £600,000 if buying a plot of land and building (the build must not cost more than £400,000) or £400,000 if you own the land already. However, this could prove to be an expensive way to buy in the long run as after the interest-free 5 years, interest is charged at a rate of 1.75% for a year, then increases each April by the Consumer Price Index rate plus 2%.

100% Mortgages

Some lenders offer 100% mortgages, allowing buyers to borrow the full purchase price of a property without requiring a deposit. While these mortgages can eliminate the need for a deposit, they typically involve stricter eligibility criteria and may come with higher interest rates or fees. The product offered by Skipton Building Society is exclusive to renters aged 21 or over, who have been renting for 12 consecutive months out of the last 18. Monthly mortgage payments must be equal to or lower than the rent they are used to paying, which will impact the amount that can be borrowed. As an example, if you pay £1,000 in rent, your mortgage repayment cannot exceed £1,000 per month. Applicants also have to meet the standard mortgage affordability requirements and pass credit score checks and all household bills and financial payments for the last 12 months must be up to date.

This product has already been so successful that the Governments are not considering launching a 1% deposit scheme, where homebuyers can put down a 1% deposit on their first home, with the government backing the loan.

However, with products such as this also come risks. If the market downturns there is a risk of buyers falling into negative equity, where they owe more on the property than it is worth and this can present problems when selling or remortgaging. 

Rent then Buy Scheme

The Rent then Buy Scheme allows first-time buyers to move into a property with a low deposit, with the opportunity to save the remainder of the 5% deposit while living in their desired home. Barratt Homes currently offer this scheme on several developments in the South of England, where a new home can be reserved with a deposit of just 2.5%. Once a mortgage for the 95% is approved, buyers can exchange and move into their new property. For the first 6 months, buyers then pay rent which is used to top up their deposit to reach the required 5%, thus helping those who cannot afford to buy their own home due to paying a lot in rent each month.  

In conclusion, first-time buyer schemes in the UK offer a range of options to help aspiring homeowners overcome the challenges of entering the property market. Whether you’re saving for a deposit, struggling to secure a mortgage or need to get the keys to your new home quicker, in the right circumstance, these schemes can provide valuable support and assistance on your journey to homeownership.

*Before committing to any scheme be sure to review all terms and conditions.