Your First Home: Demand Support Returns to a Supply-Constrained Housing Market

The financing arithmetic matters

Consider a £400,000 new-build property. With a conventional 95% mortgage, a buyer would need a £20,000 deposit and approximately £380,000 of mortgage finance.

Under the proposed Your First Home structure, the same purchase could instead comprise a £10,000 deposit, an £80,000 government equity loan and a £310,000 conventional mortgage. The buyer has therefore not simply reduced the deposit requirement by £10,000. The mortgage balance requiring conventional debt service has fallen by £70,000.

At a 4.5x gross income multiple, that reduces the illustrative income required to support the mortgage from roughly £84,400 to £68,900. The exact affordability assessment will depend on lender criteria, household expenditure and final scheme rules. The underlying mathematics, however, explains why the policy could have a material effect on the marginal first-time buyer.

2026 is not 2013

The original Help to Buy programme was introduced in the aftermath of the global financial crisis. At the time, high loan-to-value mortgage availability was significantly more constrained. The policy therefore helped bridge a genuine financing gap: it reduced the buyer's mortgage requirement while allowing lenders to operate at a lower effective LTV.

Today's mortgage market is different. High-LTV mortgages are more widely available. The problem is increasingly the price of the debt rather than its existence.

Bank Rate currently stands at 3.75%. At its September meeting, the Bank of England voted 6–3 to hold rates, with three MPC members preferring an increase to 4%. The Bank also noted that quoted two-year fixed mortgage rates were around 95 basis points above their level before the latest tightening in financial conditions.

Its regional Agents are seeing the consequences directly. The residential market has softened, new-build demand remains weak, higher mortgage rates are weighing on affordability and housebuilders are using incentives and bulk sales to support cash flow. The Agents reported no expectation of an imminent recovery in new-home supply.

This makes Your First Home a subtly different intervention from its predecessor. In 2013, the equity loan helped unlock scarce credit. In 2026, it is being used to shrink expensive credit. The former addressed mortgage availability. The latter primarily addresses affordability. That distinction matters when assessing the likely effect on housing supply.

The supply problem remains unresolved

The latest government data estimate that England delivered 196,900 net additional homes between April 2025 and March 2026. A further 90,200 were estimated to have been delivered between April and 20 September 2026, taking total net additions since the beginning of the current Parliament to 437,900 homes.

Against an ambition of 1.5 million homes over the Parliament, the arithmetic is challenging. On EGRE's calculation, delivery is approximately 222,000 homes behind a straight-line trajectory. Meeting the full target from here would require something approaching 379,000 homes per year over the remaining period — close to twice the recent annual rate.

There are some signs of improvement. Building-control data recorded 35,910 seasonally adjusted new-build starts in Q2 2026, 20% higher year-on-year. That headline requires caution, however. The government notes that recent quarterly numbers have been materially affected by a sharp increase in starts reported through the Building Safety Regulator. Starts remain 47% below their Q2 2023 peak.

The wider picture therefore remains one of constrained development. This is why Your First Home is as relevant to housebuilders as it is to first-time buyers.

The first transmission is likely to be through sales rates

Housebuilding is highly sensitive to absorption. Developers commit capital to land, planning, infrastructure and construction before recovering that capital through sales. The speed at which reservations become exchanges and completions influences cash flow, debt utilisation, return on capital and confidence in commencing subsequent phases.

A development can therefore have planning permission, available land and theoretical demand and still proceed slowly if the developer lacks confidence that completed units will sell at the required rate.

By improving the purchasing capacity of the marginal new-build buyer, the scheme can potentially increase reservation rates. Stronger reservations can reduce the need for incentives. Less reliance on discounted bulk disposals can improve realised pricing. Better forward-sales visibility can improve confidence around commencing subsequent phases.

The first-order impact is therefore unlikely to be a sudden increase in housing completions. It is more likely to be better absorption and stronger cash conversion. Only afterwards does the supply question begin.

What the original Help to Buy tells us

The government published its independent evaluation of Help to Buy earlier this month, providing an unusually useful evidence base for assessing the new scheme. More than 387,000 properties were purchased through the programme between 2013 and 2023, around 328,000 of them by first-time buyers. The total value of equity loans was £24.7 billion.

Crucially, the evaluation found evidence of genuine additional housing supply. Its econometric analysis estimated that approximately 15% of new-build homes delivered in England during the Help to Buy period were attributable to the scheme. Developers reported greater confidence, faster build rates and the opening of additional sites.

But the evidence is more nuanced than that headline suggests. The evaluation found that 46% of customers said they could not have purchased without Help to Buy. The remaining 54% said they could have bought a home anyway.

That illustrates the central problem with demand subsidies: not every pound of support necessarily creates an additional transaction. Some purchasing activity is genuinely unlocked. Some is brought forward. Some allows purchasers to buy a larger or more expensive property. And some would have occurred without government support.

This is why the eventual income and price caps matter considerably more than they might initially appear. They determine not only who receives the subsidy, but how much additional demand the scheme actually creates.

Supply elasticity determines who ultimately benefits

The government's evaluation estimates that house prices on the English side of the England–Wales border were around 2% higher during the first phase of Help to Buy than the estimated counterfactual. The effect was greater in markets that were already relatively expensive and less affordable.

It also identified an average new-build premium of approximately 5%, with Help to Buy properties carrying an additional premium of around one percentage point compared with similar non-Help to Buy new-build homes.

This is consistent with the economics of a supply-constrained market. Where developers can increase output in response to stronger demand, a greater proportion of the subsidy can translate into additional construction. Where housing supply cannot respond, a greater proportion can instead be capitalised into prices, land values or developer margins.

The critical variable is therefore not simply how much demand Your First Home creates. It is how elastic the supply response proves to be.

Construction costs do not set market prices

Higher construction costs unquestionably affect development economics. They increase the selling price a developer may require to achieve a target return. But required price and market-clearing price are not the same thing.

A developer cannot automatically pass higher labour, materials or finance costs to the purchaser simply because those costs have increased. If buyers cannot support the required selling price, the adjustment can occur elsewhere: developer margins can compress, land values can reprice, incentives can rise, specifications can change, development phases can be deferred or a project can cease to be viable altogether.

Your First Home effectively attempts to narrow that viability gap by increasing the purchasing power of the buyer. That can support development. It does not abolish the underlying supply constraints.

The hidden equity question

A buyer using the full 20% equity loan would have a conventional mortgage LTV of only 77.5%. On the surface, that appears considerably less leveraged than a buyer using a 95% mortgage. Economically, however, the purchaser's initial equity remains very thin.

If Your First Home ultimately adopts the same proportional repayment mechanism as the previous Help to Buy scheme — where the government participates in movements in the property's value — a purchaser contributing only 2.5% of the purchase price carries most of the downside exposure on their 80% economic share.

On a £400,000 purchase, EGRE calculates that a decline of approximately 3.1% in the property value would exhaust the purchaser's initial £10,000 contribution, before transaction costs and before considering any loss of the new-build premium on resale. Under a standard 95% mortgage, a 5% fall would be required to eliminate the initial deposit.

This is an illustration rather than a prediction. The final repayment mechanics of Your First Home have not yet been published. But it demonstrates why a lower mortgage LTV should not automatically be confused with greater purchaser equity protection.

London is the difficult test

Under the previous Help to Buy programme, the maximum government equity loan was increased from 20% to 40% in London from 2016. The latest independent evaluation found no clear evidence that the London uplift generated a further increase in housing supply, even though London supply had increased during the earlier phase of the scheme.

The new announcement currently describes an equity loan of up to 20%, with local property price caps and household income limits still to be confirmed. No separate London uplift has yet been announced.

If the eventual London price cap is set materially below the price of much of London's private new-build stock, the scheme's relevance to the capital could be limited. If set significantly higher, public equity exposure per purchase rises and the risk of support being capitalised into prices becomes more relevant.

London may therefore be the clearest test of the trade-off at the centre of the policy: how to improve access to ownership without simply increasing purchasing power against supply that cannot respond quickly enough.

The timing effect should not be ignored

Once prospective first-time buyers know that government support is coming, some have a rational incentive to delay a purchase until the final eligibility criteria and implementation date are known.

That creates the possibility of a temporary air pocket in new-build reservations before implementation, followed by stronger demand once the scheme becomes available. The scale of that effect will depend on the Budget timetable, implementation speed and whether developers respond with bridging incentives in the meantime.

EGRE's underlying research therefore views the near-term transmission as potentially uneven rather than immediate. For developers and investors, that timing may matter almost as much as the policy itself.

EGRE View

Your First Home does not solve England's housing-supply constraint. It changes the economics around it.

The immediate transmission is likely to run through buyer affordability, reservation rates, developer incentives and cash conversion. Housing starts respond later — and only where land, planning, infrastructure and development viability allow additional supply to follow.

Help to Buy was introduced into a market where high-LTV credit itself had become scarce. The evidence suggests that restoring access to finance helped rebuild developer confidence and contributed meaningfully to the post-financial-crisis recovery in housing supply.

The 2026 market is different. Mortgage products exist. The cost of servicing them has become the greater constraint. Your First Home therefore substitutes public equity for a portion of expensive private debt rather than repairing a dysfunctional mortgage market.

That should help affordability. Whether it delivers the same supply response is less certain.

The previous scheme demonstrates that equity loans can generate genuinely additional housing. It also demonstrates that part of the benefit can be absorbed through transactions that would have occurred anyway and through higher prices where supply responds poorly.

The details will therefore matter more than the headline. Income caps will influence additionality. Local price caps will define the addressable market. Developer contributions will affect development economics. The scale of the programme will determine whether its effects remain concentrated or become meaningful for the wider new-build market.

In the near term, this is principally an absorption story. In the longer term, it becomes a supply story. Demand can be supported within months. Housing supply takes years. The gap between the two is where the market impact of Your First Home will ultimately be determined.