The Government has announced a new scheme aimed at helping more first-time buyers overcome one of the biggest barriers to home ownership: saving for a deposit.
The “Your First Home” scheme is expected to allow eligible first-time buyers in England to purchase a new-build home with a deposit of just 2.5%, supported by a Government-backed equity loan of up to 20% of the property's value. The scheme is intended to help people who can afford mortgage repayments but have struggled to save a traditional 5% deposit.
How will the scheme work?
Under the proposals announced so far, an eligible buyer would provide a 2.5% deposit, while the Government would provide an equity loan of up to 20%. The remaining amount would be covered by a mortgage. For example, on a £250,000 new-build property, a 2.5% deposit would be £6,250, compared with £12,500 for a 5% deposit. The Government says the equity loan will have an initial interest-free period, although the precise repayment terms have not yet been confirmed.
The scheme will be limited to first-time buyers purchasing new-build homes from participating developers. There will also be household income and local property price caps, with further details expected to be announced at the Budget on 28 October 2026.
What does this mean for first-time buyers?
For some buyers, the reduction in the deposit requirement could make home ownership more achievable, particularly for those who have sufficient income to support a mortgage but have found it difficult to build up a larger deposit.
However, a smaller deposit does not necessarily mean a home will be more affordable overall. Buyers will still need to demonstrate that they can afford the mortgage and other costs associated with buying and owning a property.
There is also an important distinction between the deposit and the Government's equity loan. The equity loan will ultimately need to be repaid, so buyers should understand the terms and potential future costs and potential risks before committing to a purchase.
What does it mean for new-build purchases?
The scheme could also have implications for the new-build housing market, as it is specifically designed to support purchases from participating developers. The Government says the initiative is intended not only to help first-time buyers but also to stimulate demand for new homes and support housing supply.
However, there are still important details to be confirmed, including the precise income and property price limits, the contribution developers will be required to make and the full terms for repaying the equity loan.
What should buyers do now?
For anyone considering buying their first home, it is worth understanding the scheme but not making financial decisions based on the headline 2.5% deposit figure alone. The full details are expected to be announced in the Autumn Budget on 28 October 2026. In the meantime, prospective buyers can consider their budget, mortgage affordability and the other costs involved in buying a property, including legal fees, surveys and moving costs.
As with any property purchase, taking independent legal advice before committing to a transaction can help ensure you understand exactly what you are buying, the terms of the funding available and your legal obligations.
The key message is that the new scheme could reduce the upfront deposit barrier for some first-time buyers, but the full picture will not be clear until the Government publishes the detailed rules.
If you're considering buying your first home, Parker Bullen’s residential property team can help you navigate the conveyancing process. Contact us for more information.