LSL Financial Services has hailed the government's new 2.5% deposit scheme as a potential boost for first-time buyers but warned new-build sales may slow until the full details are known.
Announced on Saturday, Your First Home will allow buyers in England to buy a new-build home with a 2.5% deposit and the help of a 20% equity loan from the government. It effectively replaces Help to Buy, which ended in 2023.
A household income cap and local price caps will also apply, though the full details and launch date will not be confirmed until the Budget on 28 October.
Craig Hall, director of strategic partnerships at LSL Financial Services, said: "Everyone connected to new homes has been desperate for some sort of government support, so this is hugely welcome.
"The new-build market is in need of reinvigoration. Builders are throwing everything at every customer in incentives and starts and completions have been going the wrong way for a couple of years. This will help get builders building and selling again.
"The two biggest hurdles for first-time buyers are the deposit and affordability. Help to Buy ticked both boxes and, with a 2.5% deposit, this new scheme goes further, so buyers can get on the ladder even earlier."
But Hall warned the wait for the Budget could hit new-build transactions in the short term and that the scheme's long-term success would hinge on where the caps are set.
Hall added: "While this is great news for the industry, there is a risk that first-time buyers who are ready to buy now will hold off until they know how the scheme works. That would be a perfectly reasonable reaction.
"The Budget will give us much more to go on. We hope the income and price caps are realistic, so the scheme works for first-time buyers, wherever they live, and that those caps are reviewed regularly to keep pace with rising house prices and wages."
Housebuilders, lenders and brokers will debate how the scheme works in practice at the LSL New Homes Forum on 19 November, three weeks after the Budget. LSL will release further details and a full agenda shortly.
Hall said: "It will be interesting to see how lenders react. Many require borrowers to put down at least 5%. The good news is lenders already have the infrastructure from Help to Buy. Around 30 supported it before it closed, from high street banks to specialist lenders and regional building societies, so I'd hope any barriers can be overcome."
The move follows action from the Welsh and Scottish governments to help first-time buyers in their respective countries. In July, the Welsh Government announced that its version of Help to Buy would remain open to applications until 31 March 2027. Scotland's First Homes Fund opened in June, offering first-time buyers up to £10,000 towards homes worth up to £300,000.
