First-time buyers could purchase a £230,000 new-build home with a deposit of just £5,750 under a new government-backed initiative announced by Prime Minister Andy Burnham.
The scheme, called Your First Home, is aimed at people who earn enough to afford mortgage repayments but have struggled to save the large deposit traditionally required to buy a property. Eligible buyers will be able to put down a deposit of just 2.5%, with the Government providing an additional equity loan worth 20% of the property's purchase price.
While the scheme could make buying a home considerably more accessible, there are important conditions buyers will need to understand before applying. The scheme was initially announced in September in Liverpool, with more government guidance published this month.
How much could first-time buyers save?
The scheme could make a significant difference for people who have been priced out of homeownership because of deposit requirements. For example, someone purchasing a new-build property worth £230,000 would need to save just £5,750 for their deposit. The Government would then provide an equity loan worth £46,000, leaving the buyer needing a mortgage of £178,250.
Without the scheme, someone taking out a standard 95% mortgage on the same property would typically need a £11,500 deposit and borrow £218,500. The smaller mortgage could also mean lower monthly repayments, depending on the interest rate offered by the lender. The Government says the scheme could save buyers hundreds of pounds each month compared with taking out a standard 95% mortgage.
Who is eligible?
Your First Home will only be available to first-time buyers purchasing eligible new-build properties in England. There are also income restrictions. Households must earn no more than £110,000 a year outside London, or £140,000 within London.
Buyers must have a deposit of at least 2.5%, with a maximum deposit limit of 15%. The property must also fall within the Government's local price cap, meaning not every new-build home will qualify. Buyers will need to purchase from a developer signed up to the scheme and arrange a repayment mortgage through a participating lender. The property must be intended as the buyer's home rather than as an investment.
The catch buyers need to know
Although the Government's equity loan will initially be interest-free, it is not free money. The interest-free period will last for the first five years. From year six, interest will be charged at 1.5%, increasing to 3% from year seven. These interest payments are separate from the buyer's mortgage and do not reduce the original equity loan.
The Government's share is also linked to the property's value, rather than being a fixed cash amount. For example, someone purchasing a £300,000 property would receive a £60,000 equity loan. If the property later increased in value to £320,000, repaying the 20% equity loan would cost £64,000. If its value fell to £280,000, the repayment would instead be £56,000. This means buyers could end up repaying more than the amount originally borrowed if their property increases in value.
When can people apply?
The Government expects Your First Home applications to open in February 2027. Further information about participating housebuilders, mortgage lenders and the application process will be published before the scheme launches.
