Your First Home scheme: the new 2.5% deposit plan explained

On 26 September 2026 the government announced Your First Home, a new scheme to help first-time buyers in England onto the ladder. The headline: buy a new-build home with a deposit of just 2.5%, with the government lending you a further 20% as an equity loan. The scheme isn't open yet — the full details are due in the Autumn Budget on 28 October 2026, and we'll update this guide when they're published.

What we know so far

• 2.5% deposit: half the 5% minimum that the old Help to Buy scheme asked for.
• 20% equity loan: a government-backed loan for a fifth of the price, so your mortgage only needs to cover around 77.5%.
• Interest-free to start: the equity loan will have an initial interest-free period. How long it lasts hasn't been confirmed.
• First-time buyers, new builds, England only: you'll need to buy a newly built home from a developer that has signed up to the scheme.
• Income and price caps: there will be a household income cap and local property price caps, so support goes to buyers who need it. The figures will be set out at the Budget.
• Developers pay in: housebuilders will be expected to make a contribution when they join the scheme, to help cover its costs.

The government expects pre-registration to open by the end of 2026. Until the Budget, the interest-free period, the caps and the launch date are all still to be confirmed.

How the numbers could work

Take a £300,000 new-build home. With Your First Home, the purchase would be split like this:

• Your deposit (2.5%): £7,500
• Government equity loan (20%): £60,000
• Your mortgage (77.5%): £232,500

Compare that with buying the same home on a standard 95% mortgage: a £15,000 deposit and a £285,000 mortgage. At an illustrative rate of 4.5% over 30 years, the monthly repayment on £232,500 is about £1,178, against about £1,444 on £285,000 — roughly £266 a month less, before the equity loan starts charging interest.

In practice the gap could be bigger. Lenders price mortgages in loan-to-value bands, and a mortgage at around 77.5% LTV usually gets a noticeably cheaper rate than one at 95%. That's the basis of the government's claim that buyers "could save hundreds of pounds per month compared to a 95% mortgage".

The catches

• The equity loan isn't free money. You repay it, normally when you sell or remortgage away from it. If it works like Help to Buy, you repay a share of the home's value at the time, not the amount you borrowed. If your £300,000 home is later worth £350,000, a 20% share is £70,000.
• Interest kicks in later. Under Help to Buy, fees started in year six at 1.75% of the loan and rose every year after that. Expect something similar once the interest-free period ends, and plan for that cost from the start.
• New builds only. New homes often sell at a premium over comparable older homes, and that premium can disappear the moment you move in. With only 2.5% of your own money in, a small fall in value could leave you with little or no equity.
• Less choice. You can only buy from participating developers, under the local price cap, so the homes on offer may be limited where you want to live.
• Remortgaging gets more complicated. When your first fixed deal ends, any lender you switch to has to accept the equity loan, which can narrow your options.

How it compares with Help to Buy

If this sounds familiar, it should. The Help to Buy equity loan ran in England from 2013 until 2023: a 5% deposit, a 20% equity loan (40% in London), interest-free for five years, and new builds only. From 2021 it was limited to first-time buyers, with regional price caps. Your First Home follows the same model but halves the deposit and adds an income cap.

Help to Buy got a lot of buyers onto the ladder, but it was criticised for pushing up new-build prices and helping housebuilders as much as buyers. A government review found it gave good value in its early years, and less once more lenders went back to offering low-deposit mortgages. The developer contribution and income cap look designed to answer those criticisms. Whether they do depends on details we'll only see at the Budget.

Should you wait for it?

• If you're set on a new build and your deposit is small, it's probably worth waiting for the details on 28 October before you commit.
• If you'd rather buy an older home, or you already have a 5–10% deposit, the scheme may not help you. Low-deposit mortgages are already available — see today's 95% LTV rates and first-time buyer deals.
• Keep saving either way. A bigger deposit means a lower LTV band, a cheaper rate and less reliance on an equity loan you'll eventually need to repay.

To see where you stand, try the affordability calculator and check your first-time buyer relief with the stamp duty calculator. If you're still shopping, set a free alert for the deposit size you're aiming for and we'll email you when a better rate appears.

This is general information based on the government's announcement of 26 September 2026, not mortgage advice. The scheme hasn't launched yet and its terms may change. Speak to a qualified adviser before you make a decision.