LONDON, October 6 — The UK government is set to launch ‘Your First Home’, a new policy designed to stimulate the housing market by providing interest-free loans worth up to 20% of a new home’s value as a deposit bridge. This move recalls the 2013 Help to Buy scheme and comes amid a global resurgence of housing as a political issue. The policy announcement follows two years of focus on rental sector reforms.
According to the data, nearly 450 mortgage products offering 95% loan-to-value ratios are available today, compared to just over 50 in 2013. However, the primary barrier to new housing supply is not financing but the viability of building new homes.
Construction costs have risen 50% over the past six years, with half of this increase attributed to labour and materials inflation, and £39,000 per home attributed to new regulations and taxes. These policies, including the Future Homes Standard, nutrient neutrality and biodiversity rules, cladding and landfill taxes, and enhanced building safety processes such as dual staircasing, have cumulatively undermined economic competitiveness and contributed to inflation.
As a result, UK housing starts are down 36% compared to 2025 levels so far this year and 15% lower over the last quarter, according to Glenigan data. Critics argue that ‘Your First Home’ addresses a supply-side problem with a demand-side solution, repeating past policy errors.
The real-term value of the average UK house has fallen 20% from its 2022 peak, returning to levels last seen in 2013 when the original Help to Buy launched. The policy is viewed as inefficient and inflationary, particularly given constrained government resources. It risks exacerbating tensions between the Treasury and the Bank of England, which is seeking to reduce demand in a supply-constrained economy.
The lack of policy coordination is evident as the Bank of England works to squeeze out excess demand while the government attempts to stimulate it, a dynamic that echoes past mistakes contributing to high inflation and increased debt servicing costs. In the rental sector, the Renters’ Rights Act has triggered a withdrawal of supply and pushed rental inflation to 4.2% annually, prompting calls for rent controls rather than supply-side solutions—further highlighting a broader lack of supply-side thinking across the UK political class.
