Your First Home Scheme: 2.5% Deposit, Explained

Tomorrow, 28 October, Chancellor John Healey is due to set out the full rules for Your First Home, the government's new equity-loan scheme for first-time buyers. The headline is already public: a deposit of just 2.5%, with the government lending up to a further 20% of the price. For anyone who can afford a monthly mortgage payment but cannot save a large deposit, that changes the maths completely. It does not remove every barrier to buying, and several important details are still unconfirmed. Here is what is announced, what is only reported, and what to check before you get excited.

What is Your First Home?

Your First Home was announced on 26 September 2026 by the Ministry of Housing, Communities and Local Government. It revives the Help to Buy equity-loan idea, which ran from 2013 to 2022 and, according to the government, helped more than a third of a million people buy a new-build home. The new scheme targets first-time buyers with a regular income but no large deposit and no family help — buyers without the “bank of mum and dad”.

It applies in England only, and only to new-build homes from developers that sign up. Participating developers are expected to contribute towards its costs through a fee linked to property values. Full rules are due at the Autumn Budget on 28 October, with pre-registration expected by the end of 2026. The scheme is not open yet.

How the 2.5% deposit works

The price is split three ways: your deposit (2.5%), a government equity loan (up to 20%) and a mortgage (77.5%). That smaller mortgage is the real prize, because a 77.5% loan-to-value mortgage is generally priced more cheaply than a 95% mortgage — the lender takes less risk. The government says buyers could save “hundreds of pounds per month” compared with a 95% mortgage.

New-build price	Your 2.5% deposit	Government loan (20%)	Mortgage (77.5%)
£200,000	£5,000	£40,000	£155,000
£250,000	£6,250	£50,000	£193,750
£300,000	£7,500	£60,000	£232,500

Compare that with a standard 95% mortgage on the same £300,000 home: a £15,000 deposit and a £285,000 mortgage. Your First Home halves the deposit and cuts the mortgage by £52,500. At an illustrative rate of 5.5% over 25 years, the £232,500 mortgage would cost about £1,428 a month, against roughly £1,750 for the £285,000 loan — a difference of around £322 a month. That is an illustration, not a scheme rate: your actual rate depends on your lender, credit history and market rates at the time.

What you repay — and when

The government loan is not a gift and it is not a fixed sum. It is a share of your home: you repay 20% of whatever the property is worth at the time you repay, not the amount you borrowed. If your £300,000 home rises to £350,000, you repay £70,000. If it falls to £270,000, you repay £54,000. You share both the gain and the fall with the government.

The loan is interest-free for five years, according to the government's announcement. What fee, if any, is charged after that is still to be confirmed at the Budget. The loan must be repaid in full when you sell, within 25 years, or when your main mortgage ends. You can also repay it earlier, in full, if you choose.

“Too many young people are struggling with housing, with many giving up hope on ever having a home to call their own. ‘Your first home’ will get them the keys to their own front door.” — Prime Minister Andy Burnham, announcing the scheme

Who can use it — and what is still unknown

Announced: first-time buyers only, England only, new-build homes only, from participating developers, with a household income cap and local property price caps to target support at those who need it. Reported but not yet confirmed: a maximum property value of up to £600,000, an income cap of around £90,000 per household (£110,000 in London), and a deposit limit to prevent buyers with substantial savings from qualifying. Treat those figures as expected, not settled, until the Budget confirms them. If a cap excludes your area or household, or you are buying a resale home or living outside England, this scheme will not help you.

The catch: a smaller deposit is not the same as a smaller hurdle

Analysis from Tembo, a mortgage platform, modelled the scheme across 17 English cities and found it cuts the average time needed to save a deposit from 34 months for a standard 5% deposit to 18 months under Your First Home — a genuine breakthrough for savers. But the same analysis found the problem then shifts from saving to borrowing: buyers earning at the lower end of local salaries would need a mortgage of more than 4.5 times their income to buy an average new-build in 13 of the 17 cities, and even median earners would exceed that threshold in eight cities. In London, a lower earner would need to borrow 9.9 times their salary. For many buyers, the binding constraint is no longer the deposit — it is whether a lender will lend enough.

Your First Home vs the old Help to Buy

	Your First Home (2026)	Help to Buy (2013–2022)
Deposit	2.5%	5%
Government equity loan	Up to 20%	20% (40% in London)
Mortgage	77.5%	75% (55% in London)
Interest-free period	Five years (announced)	Five years
Income cap	Yes, level due at Budget	No

The old scheme was criticised for pushing up new-build prices and leaving some buyers overstretched. The income cap and developer contribution in the new scheme are, in part, an answer to that criticism. Whether they work will depend on the caps the Budget sets and on how many developers sign up.

What to do before the Budget

1. Wait for the confirmed rules. Do not sign anything or pay a reservation fee on the basis of reported caps the Budget may change.
2. Check your borrowing power. Ask a lender or broker what you could borrow, and at what rate, for a 77.5% mortgage versus a 95% mortgage.
3. Budget beyond the deposit. You will still need money for fees, moving costs and an emergency buffer after you move.
4. Compare the whole deal. A resale home, a shared-ownership home, or waiting to save a larger deposit may still suit you better — especially if scheme new-builds carry a price premium.
5. Watch for pre-registration through official channels only, expected by the end of 2026, and be wary of anyone charging a fee for early access.

Frequently asked questions

Is Your First Home open yet?

No. It was announced on 26 September 2026 and is due to be confirmed at the Autumn Budget on 28 October 2026, with pre-registration expected by the end of 2026.

Is the 20% government loan free money?

No. It is an equity loan equal to 20% of your home's value, repaid as 20% of the value at the time of repayment — on sale, within 25 years, or when the main mortgage ends.

What happens if my home falls in value?

You repay less on the equity loan, which softens the blow. But your mortgage debt does not fall with the price, so you could still owe more than the home is worth if prices drop sharply.

Can I use it outside England?

No. Your First Home is for England only. Buyers elsewhere in the UK need to check the separate schemes available where they live.

Will it help if I cannot borrow enough?

Not on its own. You still need to pass a lender's affordability checks, and Tembo's analysis suggests that for lower earners in many cities, borrowing power — not the deposit — remains the main obstacle.

The most useful thing you can do today is also the least exciting: wait one more day for the confirmed rules, then run your own numbers. If the caps fit your income and area, and a lender will lend you enough at a rate you can live with, Your First Home could cut years off your wait. If they do not, a small deposit was never going to be the answer — and knowing that before you commit is worth more than any headline.