First time buyers: Scaling the ladder to success

In December last year, a survey from the Building Societies Association (BSA) found that confidence remains high among first time buyers, with overall numbers of this borrower cohort rising.

The BSA discovered that a third of first time buyers believe now is a good time to buy a home, despite over half expecting further price rises this year. This is double the number who felt the same in 2023.

The good news for first time buyers is that a growing number of lenders are working hard to offer a realistic lending approach. They’re stretching affordability, using products like Joint Borrower Sole Proprietor loans, whilst also lending at higher Loan to Value (LTV) levels.

The affordability conundrum

On 31st March, the temporary increase to Stamp Duty thresholds ends, presenting a further increase in costs for some first time buyers. Saving for a deposit remains a significant challenge due to the high cost of living, inflated rental prices, and the low supply of new homes compared to demand.

When presented with clients taking their first steps towards homeownership, starting with a thorough financial health check is crucial. Conducting a comprehensive fact find and credit check early on, can reveal any credit file issues that might concern lenders. It’s also helpful to become familiar with the various government schemes and innovative lending solutions offered by mortgage lenders, specifically aimed at first time buyers. By doing so, you position yourself well to help a diverse range of first time buyer clients with varying affordability needs.

Client’s may have questions about the range of interest-paying savings options that are designed to help add to a deposit. Some might already be using these before starting the buying process. It’s important to understand how these savings supports work to help clients use this money towards their first property. Tax-efficient ISAs, such as the Government-funded Lifetime ISA (LISA), are examples of the types of savings accounts that first time buyers may already be using. These can be great financial options if the criteria are right for the borrower.

LISAs offer up to £1,000 a year in state funding. Savers must be over 18 and under 40 years old to open an account, and they can deposit up to £4,000 a year until the age of 50. The funds can only be used to purchase a saver’s first home, provided the property does not exceed £450,000, be withdrawn after the age of 60, or accessed if the saver has a terminal illness with less than 12 months to live. Withdrawing for any other reason will lead to a 25% charge.

In early February, the Government completed a review of LISA products to assess their current effectiveness. The outcomes of this review may lead to future changes, highlighting the importance of staying informed about evolving government schemes.

Eligibility for mortgage products

Mortgage lenders continue to be mindful of the difficulties faced by first time buyers and are keen to support this key segment of the housing market.

For applicants struggling with affordability, guarantor or Joint Borrower Sole Proprietor (JBSP) mortgages can be useful. Bank of Ireland’s JBSP solution, known as First Start, is an example of how combining the income of a sponsor with the borrower’s can help the applicant responsibly borrow more.

When referring to a ‘sponsor’ many lenders class this as a close relative, such as a parent or step-parent of the borrower, who can be added to the mortgage as a co-borrower. This allows their income to be included to boost the overall amount that can be borrowed. Both parties become co-borrowers, making them jointly and individually liable for the monthly mortgage payments as well as the total loan.

Many lenders, including Bank of Ireland, who lend up to 95% LTV, are giving borrowers with smaller deposits of 5% of the property price the opportunity to step onto the property ladder. Lenders offering products with cashback or a free valuation can further help first time buyers offset various costs associated with buying a home, such as legal fees or moving expenses.

Some first time buyers may not fit standard lending criteria due to their specific professions. These applicants might include recently self-employed dentists, doctors or GPs who are new partners in a practice, or newly qualified accountants or barristers. For these clients, a pragmatic approach to assessing their income can be helpful. Lenders offering expert, hands-on underwriting, similar to Bank of Ireland’s Bespoke solution, could make all the difference for borrowers navigating these early stages of their careers.

Government schemes

Government discount schemes are available to help make homeownership more accessible for first time buyers. These schemes can vary by local region within the UK, so it's essential to help clients research their options thoroughly.

The First Homes scheme provides discounts of 30-50% below market value on new builds or homes bought through an estate agent if originally purchased through the scheme. It’s available to first time buyers in England, aged over 18, who earn a maximum of £80,000 per annum (or £90,000 in London). Applicants must be able to secure a mortgage for at least half the price of the home. Joint applicants must all be first time buyers, and some local councils may prioritise certain groups for the discount, such as members of the armed forces and their families, key workers, locals, or those on lower incomes.

If purchasing a property is still out of reach, some councils and local housing authorities offer shared ownership schemes, allowing applicants to part-buy and part-rent a property. These schemes vary in Northern Ireland, Scotland, and Wales.

In England the scheme allows applicants to buy between 10-75% of a home’s full market value and pay rent on the remaining portion. These homes can be new builds or offered via a resale scheme, but all properties will be leasehold, incurring ground rent and service charges for upkeep of communal areas. Buyers may be able to ‘staircase’ upwards in the future, buying further equity and reducing the rent paid on the remaining portion.

Rent to Buy is another option, aimed at tenants saving for a deposit by offering properties to rent at 20% below market rent. The scheme is available in England, with a different version called London Living Rent in the capital.

There are also the Right to Acquire and Right to Buy schemes, which allow some council and local authority tenants to purchase their homes if they meet varying criteria depending on the local scheme, area, and property.

The new build advantage

Building firms can offer a range of discounts and marketing incentives on homes, increasing the appeal of new build properties for first time buyers. Some lenders, including Bank of Ireland, can accept builders’ incentives up to 5% of the purchase price with no adjustment to the purchase price or loan. When the property build is still underway, a nine-month offer from issue can provide useful reassurance during the mortgage process, especially if the offer can be extended if needed.

A day one property valuation is reassuring for everyone involved in the process, and online offers, if all the paperwork is provided, can speed up the process too.

A positive outlook despite challenges

Although the path to homeownership can seem challenging for first time buyers, there is lots of help and support available. By guiding clients through financial preparation, local research, and exploring government and mortgage lender options, you become an invaluable resource in their property-owning journey. Your expertise and support turns the dream of owning a home into a reality for many first time buyers.

Notes

(1)   BSA first-time buyer research: https://www.mortgagesolutions.co.uk/news/2025/02/06/a-third-of-first-time-buyers-think-now-is-a-good-time-to-purchase-bsa/

(2)   Government housing targets: https://www.gov.uk/government/news/planning-overhaul-to-reach-15-million-new-homes#:~:text=Press%20release-,Planning%20overhaul%20to%20reach%201.5%20million%20new%20homes,million%20homes%20over%20this%20Parliament.&text=Hard%20working%20families%20locked%20out,from%20government's%20landmark%20planning%20changes.

(3)   Lifetime ISA: https://www.gov.uk/lifetime-isa

(4)   First Homes: https://www.gov.uk/first-homes-scheme#:~:text=Selling%20the%20property-,Overview,called%20the%20First%20Homes%20scheme.

(5)   Shared Home Ownership schemes: https://www.gov.uk/shared-ownership-scheme

(6)   Rent to buy: https://www.gov.uk/rent-to-buy

(7)   Right to Acquire: https://www.gov.uk/right-to-acquire-buying-housing-association-home

(8)   Right to Buy: https://www.gov.uk/right-to-buy-buying-your-council-home

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