Andy Burnham told he risks Your First Home 'horror show' as new Wednesday update issued

Andy Burnham has been sent a new warning on proposals to help those "who have given up hope of ever having a home to call their own". The PM revealed plans at the weekend to launch Your First Home - a scheme bearing similarities to Help to Buy. First-time buyers could secure the keys to their own property with as little as a 2.5% deposit through the Your First Home scheme. A loan equivalent to 20% of the property's value will be made available to assist with the purchase as part of the initiative.

This equity loan will initially be interest-free to keep it within reach of buyers, the PM says. But the Times warns the scheme could risk being a 'horror show' as it explained how some Help to Buy homeowners faced negative equity risks - where they end up owing more money on a mortgage than their property is worth. In the case of one flat owner who used Help to Buy, he could be left with a £42,000 shortfall if he sells up, the Times reported.

Estate agents Savills warn such cases could be more common under Your First Home. And now an expert has warned the Prime Minister what he needs to do to make sure the scheme is not a failure that excludes too many people. It comes after a new Wednesday update revealed the "challenge" the new Prime Minister faces to build more homes. A new report says the amount of new homes getting planning permission has fallen by a fifth.

And a leading housing expert warned that the Prime Minister must ensure the scheme does not set property price caps and income limits too restrictively. Aneisha Beveridge, research director at Connells Group, said: "The sharp fall in planning permissions highlights the scale of the challenge facing the Government if it is serious about delivering 1.5 million homes. Housebuilders are grappling with a difficult combination of higher development costs, planning delays and weaker buyer demand, meaning many sites simply don’t stack up financially.

“Without confidence that there will be enough purchasers at the right price point, developers are understandably cautious about bringing forward new schemes. The proposed new equity loan scheme has the potential to change that relatively quickly. One of the key lessons from Help to Buy was that boosting first-time buyer demand gave developers greater confidence to invest and increase output quite quickly, with new-build delivery rising strongly in the years that followed its introduction.

“However, the eventual impact will depend heavily on the detail. Income limits and property price caps that are set too tightly could concentrate the benefits in a relatively small number of markets, while a broader scheme would support more buyers and unlock a larger increase in housing delivery.” The PM said at the weekend: "Too many young people are struggling with the cost of housing, with many giving up hope of ever having a home to call their own.

So we will step in to help more first-time buyers on to the housing ladder, especially those who can't call on the bank of mum and dad. "Your First Home will get them the keys to their own front door, and give builders the confidence to deliver the high-quality new homes the country needs. This Labour government is bringing back hope for people across the country." Yet the Times warns that the scheme could prove to be a 'horror show'.

The newspaper reported that, if implemented incorrectly, it could leave buyers vulnerable to negative equity - a situation where falling property values leave homeowners owing more on a loan than the asset is actually worth. It reported on the case of Peter, not his real name, who bought a London flat for £460,000 in 2020. The purchase was funded by a £23,000 deposit, a £184,000 Help to Buy loan and a £253,000 mortgage from Barclays.

Due to service charges and building safety issues, he struggled to attract a buyer and reduced the asking price to £300,000. Should he sell at this figure, £222,000 would need to go to Barclays to settle his mortgage, with a further £120,000 to be repaid to the government. This would entirely wipe out his deposit and any equity accumulated in the flat, leaving him needing to find an additional £42,000 to cover the remaining shortfall.

Lucian Cook from Savills told the newspaper that cases such as Peter's could become even more widespread under the Your First Home scheme, owing to its lower deposit threshold of 2.5 per cent. But he said "if interest rate come down once inflationary pressures subside, house prices should rise. That reduces the risk of negative equity and is one of the advantages of bringing this in at this point in the housing market cycle."