UK's 'Your First Home' scheme lifts housebuilders as budget details loom

Britain's new first-time buyer support scheme has raised hopes of a long-awaited revival in the country's housing market, sending housebuilder shares higher as investors bet on a rebound in sales.

The "Your First Home" programme is aimed at buyers who can manage mortgage repayments but have been unable to save a deposit amid high rents and cost-of-living pressures. Under the plan, buyers would need a deposit of just 2.5%, with the government offering loans of up to 20% of a property's value, allowing them to secure mortgages that would otherwise demand larger upfront sums. The loans would carry an initial interest-free period.

Investors welcomed the move, with housebuilder stocks rallying as the market anticipated pent-up demand being unlocked. Britain has not had a government-backed buyer support scheme since "Help to Buy" ended in March 2023 — the longest such gap in decades. Developers have pressed for its return as borrowing costs and affordability constraints weighed on sales.

"Overall, I think this could help stimulate volumes in the housebuilding market," said James Thorne, a fund manager at Columbia Threadneedle, which holds shares in homebuilder Crest Nicholson and some building materials suppliers.

Much now rests on the budget that new finance minister John Healey will present on October 28, when income thresholds and regional price caps are expected to be set out. Analysts say those parameters will determine how much demand the scheme generates, especially in the more expensive parts of southern England.

Sam Cullen, an analyst at Peel Hunt, identified the level of regional price caps and the definition of regions as the two biggest unknowns. The previous scheme used England's nine standard regions, but Cullen noted that builders sometimes struggled where affluent areas fell inside lower-cap regions or straddled regional boundaries.

Unlike "Help to Buy", the new programme will include income caps and tighter price restrictions intended to focus support on those most in need. It will also require developers to contribute financially, raising concerns that smaller builders could find it harder to take part.

Steve Turner, executive director of the Home Builders Federation, said the scheme's success would largely depend on the parameters set for household income, house prices and developer contributions. "Help to Buy" had drawn support from builders because it was accessible to a broad range of buyers and developers, he added.

Richard Donnell, executive director at property website Zoopla, said boosting first-time buyer purchasing power would help, but increasing housing supply was equally important. "The greatest impact on housing delivery will come if it is accompanied by more homes being built at the price points and in the sizes first-time buyers are looking for," he said.

Analysts named Persimmon and MJ Gleeson, both heavily exposed to first-time buyers, among the likely winners. Building materials companies such as bricks supplier Ibstock could benefit even sooner, since construction activity typically rises before homes are sold.

"The parts of the market likely to see the greatest benefit are brick suppliers and other areas of the supply chain, which should benefit from that volume growth," Thorne said.