London first-time buyers given £39,000 alert over new Labour scheme

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London first-time buyers drawn to Labour's Your First Home's 2.5% deposit could still require close to £39,000 upfront to purchase a property at the scheme's inner-London price…

London first-time buyers drawn to Labour's Your First Home's 2.5% deposit could still require close to £39,000 upfront to purchase a property at the scheme's inner-London price ceiling, a mortgage broker has cautioned. Stephen Perkins, managing director of Yellow Brick Mortgages, warned that Stamp Duty, sizeable mortgages and restricted choice could render the scheme less attainable than its modest deposit implies.

Your First Home offers eligible buyers a 20% Government equity loan, interest-free for five years, towards a new-build property. With a minimum 2.5% deposit, buyers would need a mortgage covering the remaining 77.5%.

However, Mr Perkins questioned whether the scheme would genuinely assist Londoners in purchasing homes suited to their long-term requirements. A buyer acquiring a property at the £650,000 inner-London cap would require a £16,250 deposit, alongside £22,500 in Stamp Duty.

That amounts to £38,750 before legal fees, mortgage charges or removal costs. First-time buyer Stamp Duty relief vanishes entirely once a property exceeds £500,000.

Mr Perkins said: "A 2.5% deposit sounds transformational until the buyer discovers they may need more cash for Stamp Duty than for the deposit itself. If much of the realistic new-build stock in inner London sits above the £500,000 Stamp Duty threshold, the scheme removes one very large upfront hurdle and immediately replaces it with another. A buyer looking at a £650,000 home would still need nearly £39,000 just for the deposit and Stamp Duty before any of the other costs of buying."

Purchasing at the inner-London ceiling would leave a £503,750 mortgage following the minimum deposit and equity loan. At 4.5 times income, that suggests household earnings of approximately £112,000, before factoring in childcare, debts and other financial obligations. Yet the scheme's London household income ceiling is £140,000.

Mr Perkins continued: "That creates a strange sweet spot.

The obligation to buy a new-build within the price…

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