Help to Buy is back. The real story is the exit.
Your First Home gives first-time buyers a 2.5% deposit route into new-build. For SME developers it changes the one variable development finance actually underwrites on.
The government announced Your First Home on 26 September. First-time buyers in England put down 2.5%, the government lends 20% as an equity loan against a new-build property, and a participating lender covers the rest. Housebuilder shares moved double digits within hours. Most of the commentary since has been about whether it helps first-time buyers. The more consequential question, for anyone building or funding new homes, is what it does to the sales exit.
What was actually announced
Why the market moved before the detail arrived
Persimmon rose around 15%. Barratt Redrow and Taylor Wimpey gained 12 to 14%. Bellway and Vistry posted double-digit gains, and the wider home-construction index jumped more than 11% to a six-month high. That is not a reaction to a first-time buyer policy. It is a reaction to sales rates.
Help to Buy ran from 2013 to 2023 and, whatever else is said about it, it underwrote the pace at which new-build units sold. Volume builders planned around it. So, quietly, did the lenders funding them.
The exit is what development finance underwrites
This is the part the general coverage will miss. A development lender is not really lending against a building. It is lending against the proposition that the units sell, at a given price, within a given period. We wrote recently that exit strategy has become the primary underwriting criterion on short-term and development lending, ahead of loan-to-value and ahead of borrower experience, and that lenders now want the exit evidenced rather than stated.
A scheme that underwrites first-time buyer demand on new-build stock does exactly that. It converts a sales assumption into something closer to a supported forecast. On a practical level that should mean faster sales rates, less capital tied up in finished but unsold units, better cash flow through the back end of a scheme, and more confident gross development value assumptions going into an appraisal. Lenders price against all four.
Supply and demand, pointing the same way
Taken on its own this is a useful scheme. Taken alongside what has already been announced this year, it is something more interesting. The National Housing Bank launches with £16 billion of capitalisation and SME-specific lending products, joined by a new National Housing Delivery Fund, a £700 million extension of the Home Building Fund, a medium site planning category for schemes of 10 to 49 homes, and Biodiversity Net Gain simplification.
All of that is supply-side. Your First Home is demand-side. For the first time in over a decade, public policy is pushing capital toward small and mid-sized developers and pulling buyers toward the homes they build, at the same time and at broadly the same bracket of the market. That alignment, rather than either measure on its own, is the story.
The parts worth being careful about
Help to Buy was widely criticised for inflating new-build prices and improving volume housebuilder margins more than it improved affordability. Nothing announced so far rules out a repeat, and the income caps and price restrictions are an acknowledgement of that criticism rather than a solution to it.
The developer contribution is the detail that matters most for Credco clients and it has not been defined. A contribution that is comfortably absorbed by a plc building two thousand units a year is a different proposition on a twenty-unit scheme. Whether the mechanism is workable for SMEs as well as PLCs is the question to put to the Budget.
And the scope is narrow. New-build only means nothing changes for a refurbishment scheme, a conversion, or any project whose exit is a resale. England only means nothing changes in Scotland, Wales or Northern Ireland. It is also funded by cuts elsewhere, which puts a ceiling on the scale.
What to do before 28 October
If you have a scheme in appraisal, model it both ways, with and without. What you should not do is rebuild a gross development value on a scheme that is not legislated yet, because the detail lands at the Budget and the detail is what decides whether this works at your scale. It is worth asking your lender now whether they intend to take the scheme into account in their sales assumptions, because the ones that move early will be the ones quoting most competitively in November. Across development finance this is the most significant change to the new-build exit in more than a decade, and it is worth being ready for rather than reacting to. Get in touch if you want a scheme stress-tested against both scenarios.
“Everyone has read this as a first-time buyer story. On a development file it is an exit story. What a development lender is really underwriting is whether the units sell, at what price and how fast, and for ten years Help to Buy quietly answered that question on their behalf. If Your First Home does the same, appraisals get easier and terms get better. I would not rebuild a GDV on it before the Budget though. It is funded by cuts elsewhere, the developer contribution has not been defined, and that detail decides whether this works on a twenty-unit scheme or only for a volume builder.”