When the FT broke the story of the government’s new Your First Home scheme, some of its readers didn’t hold back. “Insanity,” wrote one in the comments. “Absolute madness,” wrote another, “the market is slowly correcting”.
I can see why. Prices are falling in real terms in parts of the country and in cash terms in London, and the ratio of prices to earnings is finally heading the right way. If you’ve spent ten years waiting for housing to become affordable, a scheme designed to prop up demand looks like someone grabbing the wheel just as the car starts to slow down.
Neal Hudson, the housing market analyst, takes a different view in the FT this month, and his piece is the most useful thing I’ve read on the scheme so far. Nobody has built a few million homes while we weren’t looking, he points out. Prices are easing because borrowing got expensive, and the market is braced for more of the same. He notes that the average two-year fix at 75% LTV went from 3.93% in January to 5.14% in April, and anyone placing cases in recent weeks will have watched lenders pull and reprice products more than once.
His word for where that leaves us is “zombified”. Since 2022, prices have stayed too high, but with fewer mortgaged homeowners and lending squeezed towards people with high incomes and big deposits, nothing has forced a proper reset. So the market shuffles along, stuck somewhere between boom and bust, hoping rates come down and relying on first-time buyers who borrow big multiples of their income to keep it fed.
For our industry, the most important line in the piece has nothing to do with prices. “While house prices might get the headlines,” Hudson writes, “it’s transactions that really matter.” Price growth and transaction numbers move together. When prices fall, people don’t sell. They wait for the recovery, which until now has always turned up.
That rings true from where I sit. Brokers are paid on transactions. Lenders hit their numbers on transactions, and so do conveyancers, surveyors and removal firms. A flat market with healthy volumes would be perfectly manageable. A flat market where nobody moves is a slow puncture.
It also explains why the housing ladder has quietly stopped working. The ladder runs on equity. You buy the small flat, prices rise, and the equity you’ve built becomes the deposit for the next place. Take away the price growth and the second step depends on a decent pay rise or an inheritance. Hudson singles out leaseholders facing spiralling service charges and owners caught up in cladding problems as the most stuck, and he thinks buyers are getting wise to it, skipping the first rung and waiting longer to buy somewhere bigger. You may well recognise this in your own pipeline. Plenty of product transfers and remortgage conversations, and rather fewer clients ringing to say they’ve found their next home.
So what’s actually on the table? According to the government’s announcement on 26 September, Your First Home is expected to offer first-time buyers in England a 20% government-backed equity loan with an initial interest-free period, so they can buy a new build with a 2.5% deposit. It only applies to homes from developers who sign up, and developers will be expected to make a contribution when they do. There’ll be a household income cap and local property price caps, with the detail promised at the Budget.
Hudson walks through the history, and it’s a useful reminder that Help to Buy was never one scheme. The 2013 original filled a real gap, because lenders didn’t want to do low-deposit lending on new builds, and in his view it did get more homes built. The 40% London version from 2016 was where things went wrong, with some buyers trapped by the leasehold and building safety crisis. The 2021 version added regional caps and restricted it to first-time buyers, and produced some odd local effects as builders shifted towards cheaper areas and smaller homes. Your First Home looks most like that last one.
His worry is that the income caps and local price caps could interact badly, to the point where the only homes that qualify in some areas would have to sell for less than they cost to build. I’m an Austrian at heart, so I wince a little whenever caps start stacking up. Each one makes sense on its own. Put them together and they can produce outcomes nobody intended, and the market usually finds the gap before the policymakers do.
Look at the deal from a lender’s side and it seems comfortable enough. A 2.5% deposit plus a 20% equity loan leaves a mortgage at 77.5% of the price, well inside most appetites. The buyer’s position is thinner than it looks. If the new loan works like the old one, it’s a share of the home’s value, so it rises and falls with the price while the mortgage stays where it is. On my maths, a fall of a little over 3% would wipe out the buyer’s own 2.5% stake. Add the premium new builds tend to carry over second-hand homes, which has a habit of disappearing at the first resale, and some of these buyers could own rather less of their home than they think from the day they move in. Hudson notes that under the original scheme, the people who bought flats, or used the 40% loan in London, are the ones who lost money.
He also raises a question about how the developer contributions will work and what that could mean for valuations. Small print like that tends to decide how keen lenders are, more than any headline.
The comparison he finds most telling is with the other half of the 2013 package, the mortgage guarantee scheme. Hardly anyone used it, but he credits it with delivering “a message of hope to lenders”, and says it kick-started the recovery. I think he’s onto something. Lenders and housebuilders run on confidence as much as capital, and anyone who was in the industry in 2013 will remember how quickly the mood shifted once the government signalled it was prepared to stand behind the market. Housebuilder shares rose on this announcement too. Hudson doesn’t expect the scheme to make much difference to building numbers over the next year or two, though it may do better in the Midlands and the north, where costs are lower. As a signal to builders facing a grim winter, it’s already done some of its job.
Where I agree with him most is at the end. He thinks the government may be letting a good crisis go to waste, and he’d rather see a housing strategy built to “set it up for success over the next 60 years, rather than trying to return to the past 60”. He calls stamp duty “a stupid tax that reduces market turnover” and council tax outdated and regressive, while admitting that designing alternatives is the easy part and implementing them without political and economic turmoil is the hard bit. For an industry whose income depends on people moving home, a tax that discourages people from moving is a strange thing to keep defending.
Your First Home will probably do what the 2013 guarantee did. It’ll lift the mood among builders and lenders, get some sites moving outside the south-east and give everyone a reason to hope next year is better than this one. I wouldn’t underestimate that. But it doesn’t touch the problem Hudson describes. We’ve built a housing system, and a mortgage industry, that only really works when prices go up, and the scheme is designed to make them go up again.
What happens to the 25-year-old with a 2.5% deposit if they don’t?
Sources:
Financial Times, “How to revive the UK’s zombified housing market”, Neal Hudson, 2 October 2026: https://www.ft.com/content/6a3b3029-395b-4c32-b094-289eb76e977f
GOV.UK, “New first-time buyer scheme to be confirmed at Budget”, 26 September 2026: https://www.gov.uk/government/news/new-first-time-buyer-scheme-to-be-confirmed-at-budget