Supporting first-time buyers – affordable housing schemes

In a market of fluctuating rates and stubbornly high house prices and rent, one question comes up again and again: “How can I get on the property ladder?” Affordable housing schemes aren’t a new thing, but what they are, who offers them and how they work aren’t always crystal clear.

The most well-known scheme is arguably Shared Ownership, where you purchase a percentage of a property and rent the remainder from the housing association who offers this. Often on newer, if not brand-new, properties, purchase would typically require a minimum deposit of 5% of your share of the property. The greater share you purchase, the lower the rent you pay.

Another well-known option is Joint Borrower, Sole Proprietor (JBSP) whereby a property is purchased by up to four applicants, but just one has legal ownership. It’s a solution for those who might have the deposit to purchase but are struggling on the affordability. Lenders take comfort in the additional applicants’ surplus income were there ever to be a problem with mortgage repayments being made.

A Lifetime ISA (LISA) provides additional support for would-be first-time buyers, whereby the government tops up the money you put into a LISA account. You can open a LISA if you’re between the ages of 18–39 and put in up to £4,000 each year up to your 50^th birthday. The government will add 25% to your savings up to a maximum of £1,000 annually. The funds in your LISA, including the government contribution, can be used to purchase your first home.

The ‘new kid on the block’ is Deposit Unlock. This is a 95% loan-to-value (LTV) mortgage designed to help borrowers secure a new-build home with just a 5% deposit. Purchasers must find a participating developer and check that their chosen property is available under the scheme. Deposit Unlock mortgages are currently only available via a mortgage broker with a select number of lenders but offer further support for first-time buyers with smaller deposits.

There are lenders looking to support new buyers as well with their own schemes. Notable recent announcements from high-street lenders have included a 100% LTV mortgage for borrowers currently renting and a £5k deposit mortgage supporting first-time buyers in areas with a higher average house price. Options and eligibility criteria are of course always changing, so it’s important to do your research.

Whilst the above are just a selection of the schemes and options currently on offer at the time of writing, the message is clear: the industry is working together to offer solutions for buyers that might otherwise not have the deposits or standard affordability needed*.

*Eligibility for all schemes is subject to status and lender criteria.