This final chapter sets out the main conclusions that can be drawn from the views of the range of stakeholders who participated in this study. It is primarily based around the six key research questions set by the Scottish Government for this study, and which form part of the wider First Home First evaluation. It also considers what can be inferred from the qualitative evidence in terms of the extent to which the First Home Fund has met its two core objectives.
In drawing up findings, we have been mindful that the COVID-19 pandemic emerged shortly after the First Home Fund had been established and has dominated many aspects of life for much of the period when the First Home Fund was accepting applications (effectively from December 2019-September 2020).
Conclusions to key research questions
1. What are stakeholders' experiences and views about the First Home Fund?
Overall, the evidence confirms that all of the different stakeholder groups experience of, and views on, the First Home Fund are positive.
Buyers felt the First Home Fund was relatively easy to understand, especially compared to the overall purchase process. Professional stakeholders also found the First Home Fund to be easier for prospective buyers to understand than other shared equity products. They also found it straightforward to administer and lenders welcomed the ability to use existing ICT systems with only minimal adjustments required.
Those who had completed a home purchase or were waiting for the First Home Fund to reopen in April 2021, appreciated the availability of Government support for first-time buyers, with a shared equity approach seen as an effective way of providing that financial support.
The considerable degree of flexibility permitted by the First Home Fund's eligibility criteria was felt to have worked well by all stakeholders. Central to its appeal was the freedom to select a new build or resale property on the open market rather than being tied to a particular product, the lack of means-testing, the absence of a property price cap and the ability to be able to offer over value.
The views and experiences of professional stakeholders broadly mirrored those of Buyers. Overall, the First Home Fund was seen as a helpful addition to the range of shared equity options. Being able to purchase at over the Help to Buy £200,000 maximum purchase price was seen as key to supporting those looking to buy a larger home or who are looking to buy in areas, such as Edinburgh and the Lothians, where property prices may be higher. Elsewhere, the First Home Fund was seen to have made it possible for first-time buyers to compete with 'buy to let' investors and other purchasers.
“I would happily advertise it from a soapbox”
“A brilliant idea.”
“Honestly, it’s been great, I mean life changing type of great.”
2. Why are buyers using the First Home Fund?
The reasons why buyers are using the First Home Fund very much reflect their overall views of the First Home Fund.
First and foremost, it has enabled first-time buyers to overcome the challenges of getting a deposit together, particularly for those without access to financial support from family or friends. The COVID-19 pandemic heightened the importance of the First Home Fund in this respect. The rapid reductions in the LTV of mortgages available over the summer and autumn of 2020 forced some prospective buyers to reconsider their options. For some, the Scottish Government's equity stake became vital to plugging the funding gap created by the disappearance of most low-deposit mortgage deals after the start of the pandemic.
The fact that the First Home Fund could be used to lower the value of the mortgage required and, by extension, monthly housing costs, was very important for buyers with more modest incomes or with higher outgoings, such as those with children. For such buyers, accessing the First Home Fund could make the difference between being able to buy or not, especially for those seeking a family size home where their children could flourish and grow up.
For many buyers, accessing the First Home Fund had made it possible to bring forward the decision to buy a home. Buyers typically reported that the First Home Fund had permitted them to buy their first home sooner than planned, including those who purchased a larger home in the preferred area. In the absence of the First Home Fund, Buyers generally said that they would have delayed house purchase and carried on saving for a larger deposit. Younger buyers, including those who lived with family, concurred. However, they were also inclined to say they would look to buy a larger house in their preferred area and avoid buying a property at the bottom end of the market (typically smaller flats).
3. What are the barriers, if any, to using the First Home Fund for purchasing a home?
Stakeholders did not identify any routine or frequently encountered barriers to using the First Home Fund to purchase a new home. Any barriers that were reported related to specific circumstances, such as the completion dates for new homes being delayed to the end of 2020/21 or later. Buyer choice or reluctance to access the First Home Fund was linked to personal preferences and aspirations (such as unwillingness to lose a proportion of any increase in property value) as opposed to limitations with the design or operation of the First Home Fund. For most Buyer and non-Buyers, however, foregoing a share of any capital gains (and downside risks) was seen as a reasonable trade-off in return for the assistance provided.
4. What effect, if any, has the £550 application fee had on applications?
Although no-one would choose to pay an application fee, Buyers were generally accepting of a fee being payable and of that fee being set at £550. However, some queried why charges could not be covered by the Scottish Government taking an increased equity stake, rather than being payable prior to funds being released.
Other stakeholders also felt the application fee presented few issues. It was suggested that the administration fee, when combined with other upfront costs associated with house purchase, could occasionally create a tipping point that prevented otherwise eligible buyers from applying to the First Home Fund.
5. What effect, if any, has the Fund had on stakeholders' business?
Lenders reported having been very busy since the housing market re-opened at the end of the first COVID-19 lockdown. During summer and autumn 2020 they received high numbers of mortgage applications, partly due to pent up demand during the lockdown. Consequently, First Home Fund-related applications as a proportion of all applications remained very modest, especially for the main national lenders.
In contrast, the First Home Fund appears to have had a significant impact on some IFA businesses. IFAs reported that they had been dealing with a surge in enquiries since near the end of the lockdown and that First Home Fund-related enquiries had remained at significant levels throughout summer and into the autumn, sometimes representing a good proportion of their business.
From a developer perspective, the First Home Fund was seen as addressing some of the more problematic aspects of the Help to Buy scheme and, by extension, this was seen to be having a positive impact on numbers of first-time buyers seeking to buy a new home, especially in more highly priced housing market areas. Developers felt that by allowing households to buy above the Help to Buy cap of £200,000, the First Home Fund had given developers more confidence to include a mix of 'starter homes' at different price points within their developments, and especially within larger development sites.
6. In what ways has the First Home Fund affected other shared equity schemes?
The nature of this study means evidence to answer this question is very limited but feedback from Buyers and other stakeholders suggests that the First Home Fund appeared to be the preferred option for buyers who were eligible to access one of the other Scottish Government shared equity options. Most obviously, some Buyers who purchased a new build home for less than £200,000 opted for the First Home Fund rather than Help to Buy. In large part this seems to be because the First Home Fund is not only more transparent and easier for buyers to understand, but also that the application process is more straightforward.
Amongst professional stakeholders the general consensus is that the First Home Fund is a very popular, consumer friendly and viable option. Where shared equity was a viable option, professional stakeholders said it was typically a buyer's first choice and other shared equity options would only be considered if necessary, such as when there was a need to access the higher equity stake available through the Open Market Share Equity scheme. IFAs noted that some buyers had looked at other schemes after the pilot First Home Fund closed to applications, but there was a strong perception that many prospective buyers were eagerly awaiting the First Home Fund's reopening in April 2021.
Extent to which First Home Fund is meeting its core objectives
The stated objectives of the First Home Fund are to help first-time buyers put together a mortgage deposit in order that they can purchase a home that meets their needs, which is located in the area where they want to live.
It is hard to draw firm conclusions solely from this qualitative dimension of the wider evaluation study, especially as much of the evidence has been provided by those who have in some way benefited from the First Home Fund. Keeping in mind this qualification, the evidence suggests strongly that the First Home Fund has enabled some buyers to purchase a home that meets what they consider to be their needs, but also their preferences.
By accessing the First Home Fund, some study Buyers have been able to purchase a more expensive property than they might otherwise have afforded. Without accessing the First Home Fund, these Buyers could probably have afforded to buy a home that met their needs, either now or in the not too distant future. However, they tended to say that in the absence of support, they would have continued to save until such time as they could afford to buy their preferred type of property or in their preferred location.
An important issue for any shared equity policy is whether it has extended homeownership to households who might otherwise never have been able to buy a home or whether it has mainly benefitted households who would have bought at a later date.
For the most part, the qualitative evidence suggests that First Home Fund has mostly benefited households who would probably have attained homeownership at some point. It has enabled Buyers, often in their twenties, to buy at a younger age than would otherwise have been possible. It has also, as already noted, enabled Buyers to purchase a larger property, or one in a preferred area, than they were initially looking for.
Nonetheless, it is also clear that a significant minority of Buyers had been unable to build up sufficient savings for a deposit. For this group, continuing to save was unlikely to make a material difference in terms of being accepted for a mortgage that would give them the purchasing power to buy a home suitable for their needs. It therefore seems reasonable to conclude this group of Buyers would be very unlikely to have been able to purchase without assistance.
For this minority group of Buyers, the impact of becoming a homeowner has been life changing. For some living in the private rented sector, it has enabled them to move on from living in shared, overcrowded, or other unsuitable housing. Those in their mid-thirties or older, as well as those with children, were particularly likely to emphasise the sense of security, permanence and improved wellbeing that had come with owning a home.
Overall, these findings are perhaps not too surprising. In the absence of income limits or a price ceiling, the First Home Fund was effectively open to all first-time buyers, as opposed to only those struggling to secure the minimum deposit required to secure a mortgage.
Additionality, and the extent to which the First Home Fund has assisted people who would otherwise have been unable to buy a home, may not be the only, or perhaps the best way to judge its success. That said, the study findings at least raise questions about whether the parameters for the First Home Fund might benefit from being tightened.
During the pilot period, the First Home Fund proved to be very popular precisely because it was simpler, more flexible and less formulaic than other shared equity products. This made it a viable option for households in different local housing market contexts as well as for households facing different affordability constraints and with differing housing requirements and preferences.
If the First Home Fund were to operate on a larger scale over a sustained period of time without any additional constraints on the eligibility criteria it could risk putting upward pressure on house prices in different local housing markets. On the other hand, tightening eligibility criterion and other parameters would increase the complexity of the scheme, which would run the risk of reducing consumer interest.
These observations suggest that in moving forward, it will be important to think carefully about the benefits and trade-offs from tightening the parameters of the First Home Fund and how best to set and regularly review these parameters, and in particular eligibility criteria, in response to shifting housing market conditions.
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