Your First Home, announced in the Budget, promises first-time buyers with a 2.5 per cent deposit a 20 per cent government loan on a new-build property. The scheme aims to reinvigorate London's stalled market and help ease the ongoing housing crisis.
London's property market has seen a lack of optimism in recent years, particularly for aspiring first-time buyers without family money and for housebuilders facing decreased demand, increased construction costs, and new legislation.
Reaction from Young Renters
The announcement has given hope to the capital's young private renters, many on decent salaries but struggling to save for a deposit. Rosie, 29, a conference organiser renting a one-bedroom flat in Clapham with her boyfriend for more than £1,000 per month each plus bills, says: "The option for a 2.5 per cent deposit is really quite exciting because saving is definitely the biggest hurdle."
Abigail, 29, a native Londoner who recently moved to Manchester with her partner, says: "We're both on decent salaries but neither of us have family help. We try to save what we can but I pay about 36 per cent of my salary on rent alone. From that perspective, Your First Home looks quite exciting."
Concerns Over Affordability
Almost two thirds of aspiring buyers in London are hopeful the scheme would help them on the ladder sooner, according to research from Fairview New Homes. However, data from mortgage broker Tembo warns the scheme threatens to lock out those with lower household incomes, who cannot borrow enough to cover the remaining 77.5 per cent of the purchase price. Lower earners would need a mortgage 9.9 times their income in the capital, potentially possible for a couple but out of reach for many single buyers.
Kyle, 32, who works in PR and shares a flat near Oval, says: "The mortgage is definitely the bigger sticking point for me as a single person. The majority of my friends who have bought have done it with two incomes, so it does feel stacked against single people."
Scheme Details and Industry Response
Under the scheme, first-time buyers with a 2.5 per cent deposit can access a 20 per cent government-backed equity loan, interest-free for five years, to buy a new-build property from a registered developer. The purchase price will be capped at £650,000 in inner London and £500,000 in outer London, and household income cannot exceed £140,000 in the capital. Pre-registration opens in December this year, with full applications from February 2027 and first loans issued that April.
Chancellor John Healey said: "Two in five young people are trapped paying more than a third of their income on rent while they watch their hopes of buying their own home slip away. For every young person who's working hard, saving what they can and dreaming of their first home, I'm taking action."
The Government hopes boosting buyer demand will encourage developers to build more housing. Only 6,325 new private sector homes were started in London between mid-2025 and a year later, just seven per cent of the Mayor's annual target. Just 600 new homes were sold to individual buyers in London in the first quarter of this year, according to Molior London data.
First-time buyers have had little help since Help to Buy closed in October 2022, which offered London buyers with a five per cent deposit a government equity loan of 40 per cent on a new home costing up to £600,000.
Joe Antoniazzi of London Square says: "With this new offer the lower deposit element is an absolute game changer. People want to get out of renting and even with a 20 per cent loan this is going to help." However, price caps will put only around a third of homes for sale in the capital within reach of buyers, according to estimates from property consultancy Montagu Evans.
Tom Goodall of Related Argent says: "The housing crisis in London is a multi-headed beast. You need to deal with all aspects of that simultaneously in order to kickstart what is a completely stalled engine. Clearly demand-side stimulus is a very important part of that, and so we very much welcome the concept of it, but is it going to encourage us to build more? Not in isolation."
Craig Carson, regional managing director at Barratt London, adds that Your First Home will need to be simply administered and ideally guaranteed to run for at least five, ideally 10 years, to account for the building pipeline.
Lessons from Help to Buy
Buying agent Nina Harrison advises potential buyers to avoid paying over the odds, noting that during Help to Buy some developers "pushed prices towards the artificial thresholds set by the Government". Jess Parkinson and Elliot Fitzpatrick paid £460,000 for a two-bedroom flat in Crystal Palace with a 40 per cent equity loan in 2019. They later accepted an offer of £450,000, £10,000 less than they paid, partly because they needed to sell within five years to avoid interest on the loan. Jess says the flat was over-priced because it was part of the Help to Buy scheme, but she doesn't regret using it as it gave her a secure, affordable home in London for five years. They are now settled in a three-bedroom 1960s semi in Faversham, Kent, which cost £325,000.
