First-time buyers offered up to £10,000 interest-free loans from next month

First-time buyers will be able to apply for up to £10,000 in interest free loans from next month, the Scottish government has announced.

The First Homes Fund will be available for properties worth up to £300,000.

Under the scheme, the government will take an equity share in the property, typically to be repaid upon its sale. There will be no monthly payments or interest charges.

Housing Secretary Shirley Anne Sommerville said ministers were taking "decisive action" to help first-time buyers, but opposition MSPs warned the scheme could inflate house prices.

They also raised concerns that the initiative would largely benefit better-off buyers.

The SNP made a manifesto pledge to create a £100m First Homes Fund, extending a pilot scheme that funded deposits for more than 10,000 homes between 2019 and 2022.

Somerville told parliament that the fund would open for applications by the end of June, and that it would support 50,000 households over the next five years.

She told MSPs the scheme was designed to help those stuck in a "rent trap", unable to save to buy a house due to high monthly payments.

"For too many people across Scotland, particularly younger people and first-time buyers, home ownership has felt increasingly out of reach," the housing secretary said.

"In communities the length and breadth of our nation, we are hearing the same story - people saving what they can but finding that the cost of a deposit is simply too great a barrier."

She told parliament the fund was "a direct response to the experience of people across Scotland".

Somerville added: "We have listened and are taking fast, decisive action."

Scottish government survey results, published in 2020, found that most of those who used help to buy schemes said it helped them buy a house more quickly, and to get a larger property, than they would have been able to do otherwise.

Although almost three quarters said they could have bought a property without the scheme, only about a fifth said they could have purchased the property they got with the aid of help to buy.

A report from the Institute for Fiscal Studies, released last month, said that government schemes for first-time buyers in England primarily helped higher earners in areas where homes were cheaper.

The think tank found the initiatives - including loans for first-time buyers - had a "limited" impact on social mobility and housing affordability.

While welcoming any measures to help first-time buyers, Labour's Mark Griffin raised concerns that the relaunched First Homes Fund could artificially raise house prices.

Reform's Thomas Kerr called the scheme a "gimmick" which would not "scratch the surface" of tackling the housing crisis.

Green MSP Ariane Burgess warned evidence from previous help-to-buy schemes suggested that they made properties "less not more affordable", and that they benefited better-off buyers.

Tory MSP Meghan Gallacher noted that nearly seven in 10 of successful applicants to the government's previous First Home Fund had household income above the national average.

To tackle the housing crisis, she called for the government to abolish Scotland's version of stamp duty, the Land and Buildings Transaction Tax, paid on house purchases.

Willie Rennie of the Liberal Democrats also cited concerns about the fund being a "subsidy for those who can already afford to buy their own home", and asked for reassurances that would not happen.

Somerville said the government had learned lessons from previous schemes, noting the maximum house price cap.

She said ministers aimed to ensure that the programmed helped "the people who need it most".

A severe shortage in social homes, an increase in homelessness and rising property costs prompted the Scottish government to declare a national housing emergency in 2024.

In January, First Minister John Swinney announced plans to create a national housing agency to help boost home building.

However, the government has fallen behind schedule in its target to build 10,000 new affordable homes each year by 2032.

Efforts to increase overall housing supply have also slowed.

The latest annual statistics, for 2024-25, show that 9,779 new homes were added to Scotland's housing stock - down by 628 on the previous year.

It was the lowest annual total since 2017–18, except for 2020-21, when Covid restrictions were in place.