Scotland Reopens First-Buyer Loan at Less Than Half the 2019 Size

First-time buyers in Scotland will be able to claim a £10,000 interest-free equity loan from the end of June, when the Scottish Government reopens its First Homes Fund for properties valued up to £300,000. Housing Secretary Shirley-Anne Somerville told MSPs the scheme will support around 2,000 households in its first 100 days and 50,000 over the next five years.

The relaunch borrows the design of a 2019 pilot that ran for less than three years, distributed £200 million, and helped almost 10,000 buyers. That pilot’s own Scottish Government evaluation found 68% of recipients earned at or above the country’s median household income, and that most would probably have bought a home eventually without the help.

How the £10,000 Loan Works

The fund takes a stake in the property rather than charging interest. The government’s share is repaid when the buyer sells, with no monthly payments along the way. The £10,000 sits on top of whatever deposit the buyer has already saved, which the scheme treats as a minimum 5% contribution.

• Maximum loan: £10,000 interest-free, structured as shared equity
• Property price ceiling: £300,000, new build or existing home
• Minimum deposit from buyer: 5% of purchase price
• Repayment trigger: sale of the property (no monthly instalments)
• Geography: available across Scotland, no regional carve-outs announced

The £300,000 ceiling sits comfortably above the average Scottish house price of roughly £200,000, leaving most of the market in scope. Somerville told Holyrood ministers had “listened” to younger buyers stuck in what she called a “rent trap”, the SNP manifesto having promised a £100 million First Homes Fund in the run-up to the May vote.

Ministers say applications will open by 30 June, with a portal hosted on the Scottish Government’s own homeownership pages. The detailed eligibility rules, including any income or savings limits, are due to be published when applications go live.

The 2019 Pilot’s Footprints

The shared-equity model is not new in Scotland. The First Home Fund pilot opened on 18 December 2019 with £150 million, was topped up by a further £50 million in summer 2020, and closed early in October 2022 after demand outran budget.

That earlier round handed out loans of up to £25,000, more than double what the relaunch is offering. By 1 December 2020, 9,729 applications had been approved or settled, equivalent to about 30% of all new first-time-buyer mortgages in Scotland that financial year, according to the Scottish Government’s evaluation synthesis.

The numbers in that evaluation read less like a success memo and more like a quiet warning. Average buyer income was £40,900, almost identical to the £40,800 average for all Scottish first-time buyers that year. Loan-to-value and loan-to-income ratios sat in line with the wider first-time-buyer market, not below it.

The qualitative half of the report went further:

First Home Fund has mostly benefited households who would probably have attained homeownership at some point in the future, in the absence of the First Home Fund.

That sentence sits in a Scottish Government qualitative evaluation, not an opposition press release. The same report cautioned that scaling the model “could risk putting upward pressure on house prices in different local housing markets”, a concern echoed in nearly every public response to this week’s relaunch.

From £25,000 to £10,000 in Five Years

The relaunch is smaller in almost every dimension that matters to a buyer.

The ratio that matters most is the per-household stake. A £100 million pot spread across 50,000 households averages £2,000 per buyer, well below the £10,000 headline, which signals ministers expect either lower take-up than advertised, smaller average loan claims, or a topped-up budget in a later fiscal event.

Paul Hilton, chief executive of property services firm ESPC, said the offer “is now worth significantly less than it was in 2021” once house-price inflation and the shrunk loan ceiling are taken into account. The Scottish house-price index has risen close to a quarter since the pilot closed, eating further into the real value of any fixed-cash deposit boost.

Opposition Lines Up Across the Chamber

Reaction in the Holyrood debating chamber was almost uniformly skeptical, even from parties that have voted for housing support before.

Labour’s housing spokesperson Mark Griffin welcomed any boost for first-time buyers but raised the concern that has dogged shared-equity schemes since the original UK Help to Buy in 2013: that public cash for deposits flows through to sellers as higher asking prices. Reform MSP Thomas Kerr called the relaunch a “gimmick” that would not “scratch the surface” of the wider housing shortage.

Green MSP Ariane Burgess pointed back to the evidence base, arguing previous help-to-buy schemes made properties “less not more affordable” while skewing benefits to buyers who had less need of support. Tory MSP Meghan Gallacher cited the seven-in-ten figure on above-average earners in the previous pilot and called instead for the Scottish Government to scrap Land and Buildings Transaction Tax (LBTT, Scotland’s stamp-duty equivalent levied on property purchases). Liberal Democrat Willie Rennie pressed Somerville for assurances the money would not become a “subsidy for those who can already afford to buy their own home”.

Outside parliament, Shelter Scotland Director Gordon Llewellyn-MacRae landed the harshest verdict, calling it disappointing that a government facing thousands of children in temporary accommodation had used its first major housing intervention to revive a scheme that does not address the root causes of homelessness.

The Supply Side Sommerville Did Not Address

Behind the loan headline sits a supply problem the announcement does not solve. Scotland added 9,779 net new homes to its housing stock in 2024-25, the lowest annual total since 2017-18 outside the Covid year of 2020-21, according to the latest Scottish housing statistics quarterly update.

The SNP committed in 2021 to delivering 110,000 affordable homes by 2032, with at least 70% of those for social rent. By the end of March 2025, the running total was 28,537. Approvals, starts and completions of new affordable homes all fell in 2024-25, by 31%, 21% and 22% respectively versus the prior year.

A scheme that boosts demand without expanding supply tends, on standard housing-economics grounds, to push prices up. Somerville said ministers had learned that lesson, citing the £300,000 cap as proof the relaunch was better targeted than its predecessor. If the relaunched fund hits its 50,000 target without a measurable lift in average first-time-buyer prices, she will have a stronger answer to the next round of critics. If it follows the pilot’s pattern and the next published evaluation reads the same way the last one did, the case for a third version becomes a harder one to make.

Frequently Asked Questions

When Does the Scottish First Homes Fund Open for Applications?

Applications open by 30 June 2026. The Scottish Government has not yet published the exact opening date, only the deadline window Housing Secretary Shirley-Anne Somerville set out in her statement to MSPs.

How Much Can a Buyer Borrow Under the First Homes Fund?

Up to £10,000 as an interest-free equity loan. The government takes a corresponding share in the property and is repaid when the home is sold, with the repayment calculated on that share of the eventual sale price rather than as a fixed-cash return.

Is There an Income Cap on Applicants?

No income cap has been announced for the relaunched scheme. The 2019 pilot had no means test, and the published evaluation later found 68% of buyers were on incomes at or above the Scottish household median of £30,400 in 2018-19.

Does the Property Have to Be a New Build?

No. Both new and existing properties valued at £300,000 or less qualify, on the same broad terms as the 2019 pilot. Specific exclusions for very small flats or non-standard construction may appear when the full rulebook is published.

Does the Fund Waive Land and Buildings Transaction Tax?

No. The fund does not waive LBTT. First-time-buyer relief on LBTT lifts the nil-rate threshold from £145,000 to £175,000, saving up to about £600 on most qualifying purchases, as set out by Revenue Scotland’s first-time-buyer relief guidance.

What Happens if the House Falls in Value Before Sale?

The repayment is calculated on the share of the property the government owns at the time of sale. A loss is shared with the buyer in the same proportion as a gain would be, so a fall in value reduces what the government recovers, not just what the buyer keeps.

Disclaimer: This article is for informational purposes only and does not constitute financial, mortgage or legal advice. Property purchase and shared-equity loan decisions carry long-term financial commitments and risk, including the risk that property values fall. Readers should consult a qualified independent mortgage adviser, solicitor or financial professional before acting. Scheme details, eligibility rules and tax thresholds are accurate as of publication and may change once the Scottish Government publishes the full First Homes Fund rulebook.