Despite good intentions, these piecemeal programmes lack the clarity and impact needed to meaningfully tackle the scale of the crisis — with consequences not only for those hoping to buy their first home, but also the SME developers who support them.

The government’s temporary Mortgage Guarantee Scheme (MGS) officially ended in June 2025 and was promptly made a permanent initiative called Freedom to Buy. The new iteration of the scheme continues to provide support for first-time buyers, though with some tighter criteria, alongside other government programmes such as First Homes, Shared Ownership and the Lifetime ISA. Evidence suggests that the overall impact of these measures in helping buyers onto the property ladder remains limited.

The MGS was modest but meaningful. It supported over 50,000 mortgage completions, with 86% going to first-time buyers, enabling purchases with deposits as low as 5%. The average property purchased through the scheme was valued at £216,533 — well below the UK average — while median household income among participants stood at £54,000. These figures highlight the scheme’s benefit in supporting modest earners to purchase modest homes.

Although new government schemes have stepped in, the average deposit for first time buyers now stands at over £75,000, with the average purchase price having surged to £335,800. Current government support is broad, but terms are complex and eligibility is often narrow and inaccessible. Uptake varies and many buyers — especially in high-cost regions like the South East — find themselves excluded by price caps, income limits or supply shortages.

The median house price-to-income ratio is now 7.7 in England, underscoring the strain on affordability. What’s more, mortgage rates remain stubborn at 4% to 5%, while rents have risen sharply and average UK house prices have increased by 1.8% year-on-year to £272,998.

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Meanwhile, SME developers, whose quality housing output is largely unmatched by bigger players, find themselves constrained by rising compliance costs, fierce competition for an ever-shrinking supply of smaller plots and persistent planning delays. Despite government promises to overhaul the system, developers have yet to see any evidence of this on the ground. The Home Builders Federation found that over half of SME builders are now waiting more than a year for permission, with 56% facing a 30% increase in planning costs. This aligns with what Paragon has observed: around 80% of planning applications submitted by our customers only secure approval after an appeal, but it shouldn’t have to be this way. Without new housing delivered at pace, the pressure on first-time buyers remains intensified.

Elsewhere, major housebuilders including Barratt recently launched a new private-funded 5% deposit scheme aimed at helping buyers onto the property ladder. While a noble intention that will no doubt assist some households, it raises important questions about market balance.

These partnerships enable large developers to consolidate their dominance, risking the further marginalisation of SME builders, and the schemes come with scale and financial advantages that SMEs simply cannot match.

At Paragon, we’re proud to have worked with SME developers to fund the delivery of well over 13,000 new homes since 2018. In recognition of the challenges they face, our Development Finance division recently increased its maximum loan size from £35m to £60m, giving SMEs the additional flexibility and backing they need to keep building.

But lenders cannot tackle this challenge alone. If government is serious about making a dent in the housing crisis, it must rethink how we incentivise first-time buyers to step onto the property ladder.

Instead of a patchwork of complex, piecemeal initiatives that often leave buyers confused and discouraged, we need a broad, streamlined stimulus that is accessible and effective for many.

On the supply side, we need to see the promises made at the election finally being delivered through a functioning planning system.

Supporting first-time buyers in a clear and substantive way is essential to sustaining demand and driving construction. Housing is fundamental to the health of the economy, and simply too important to stall.