Should first-time buyers wait for Your First Home, or explore their options now?

When a new government housing scheme is announced, it doesn't take long for prospective buyers to start asking whether they should put their plans on hold. That creates an interesting challenge for mortgage advisers, particularly when the full details of the proposed initiative have yet to be confirmed.

The Your First Home scheme is generating exactly this type of conversation. With the prospect of a 2.5% deposit and a government-backed equity loan of up to 20%, it's easy to understand why some aspiring homeowners might be tempted to wait and see what becomes available.

It's an initiative which has the potential to make a meaningful difference to first-time buyers (FTBs), particularly those struggling to accumulate the savings required to purchase a property.

However, with further details expected at the Budget, including eligibility requirements, property price limits and implementation dates, considerable uncertainty remains about exactly who will benefit and when.

This raises an important question for the advice process. How do you help clients make informed decisions about buying a home today when they are also considering an option that may become available in the future?

Research from Mortgage Advice Bureau (MAB) provides an interesting indication of the ongoing deposit challenge. Earlier in the year, it found that 47% of aspiring FTBs would purchase immediately if their mortgage repayments were similar to their current rent, while 27% identified saving for a deposit as their biggest barrier to buying.

Perhaps equally revealing was the finding that 73% were unaware that 95% loan-to-value mortgages were available.

These findings suggest there may be opportunities for intermediaries to explore whether clients could access homeownership sooner than expected, rather than assuming further saving or government assistance is necessary.

Considering the alternatives

The government's proposed equity loan could reduce the amount a borrower needs to finance through a conventional mortgage, although the future repayment obligations will require careful consideration once the terms are confirmed. Its proposed focus on participating new-build developments may also influence the choice of properties available.

However, while the attention surrounding the announcement is understandable, higher loan-to-value and deposit-free lending options already exist.

A prospective buyer who has consistently maintained rental payments may have demonstrated an ability to manage substantial monthly housing costs over an extended period, even if they have struggled to build a deposit. This is where lending approaches that recognise rental payment history can provide an alternative to more conventional mortgage requirements.

For example, our 100% Rent to Own mortgage considers applicants who can demonstrate a satisfactory rental payment history over the previous 12 months. Available across England, Scotland and Wales, it provides an option for eligible renters who have established a record of meeting their housing commitments but have limited savings.

Of course, a successful rental history does not automatically establish mortgage affordability. Homeownership brings additional costs and responsibilities, while borrowing the full purchase price leaves borrowers without an initial equity cushion and more exposed to any fall in property values.

Rental performance therefore needs to be considered alongside income, expenditure, financial resilience and the borrower's longer-term plans. Manual underwriting can play an important role here, allowing lenders to consider the circumstances behind an application rather than focusing solely on the availability of a deposit.

Helping clients assess their options

The proposed government scheme and existing deposit-free mortgages offer different ways of addressing the same challenge, but neither will be suitable for every borrower.

Waiting for the new scheme may be worthwhile for some clients, particularly if its eventual terms suit their circumstances and property preferences. Others may already qualify for an existing mortgage and could benefit from understanding the options available to them today before deciding whether to delay their plans.

The challenge is to help borrowers assess these possibilities when the details of the government's proposal are still emerging.

The proposed Your First Home scheme is a welcome development and could make a meaningful contribution to improving access to homeownership. However, its announcement should not overshadow the opportunities that already exist.

Clients who have spent years assuming a deposit is the final obstacle to buying may find it worthwhile exploring already available mortgage options, alongside considering whether Your First Home could be right for them once the full details are confirmed.