Chancellor John Healey used his autumn Budget statement to announce a new First-Time Buyer ISA, changes to the Lifetime ISA penalty and the Your First Home equity loan scheme, all aimed at helping first-time buyers get onto the property ladder.
Speaking in the House of Commons on Wednesday (October 28), Healey said he was "taking action" to support first-time buyers, announcing that "a First-Time Buyer ISA will replace the Lifetime ISA." He also addressed the current Lifetime ISA (LISA) limitation, whereby a property purchase exceeding £450,000 triggers a 25 per cent penalty. "From today I'm dealing with the LISA penalty, so that if the home you want costs more than the limit, you will get back at least what you put in," he said.
Your First Home scheme details
Healey formally confirmed that the Your First Home scheme, aimed at "first-time buyers who don't have the bank of mum and dad behind them," will launch next spring. He described it as "an equity loan scheme" funded by £4.7 billion of government-backed lending, but provided little detail during his speech.
According to the government website, Your First Home is a new initiative designed to help first-time buyers purchase a new-build property with a smaller deposit and mortgage. Eligible buyers will be able to purchase a home using:
- a deposit of at least 2.5% of the purchase price;
- a repayment mortgage from a participating lender;
- a government equity loan worth 20% of the purchase price, interest-free for five years.
The scheme is anticipated to open for applications in February 2027.
Challenges facing first-time buyers
Ryan Etchells, chief commercial officer at specialist mortgage lender and financial provider Together, said first-time buyers face a "triangle of challenges" - saving the deposit, mortgage affordability and a lack of housing. "The First-Time Buyer ISA and Your First Home Scheme is aimed at helping saving for that deposit, which is arguably the hardest part of the equation," said Etchells.
Etchells noted that mortgage affordability was partly addressed through Healey's cost of living policies, including an energy bills support package worth £2.6 billion, while approximately 20 million households in council tax bands A to D are set to receive £100 from the government this winter.
"Affordability and the cost of living challenges was a big focus of the budget today and Healey spoke about various measures that aim to help reduce people's expenditure around gas, electricity and water etc – which in theory should help alleviate some pressure from people paying their mortgage," said Etchells.
To tackle the housing shortage, Healey announced the government would be "drawing the line on constant changes to building regulations," including removing biodiversity requirements for more brownfield sites. He also revealed plans to "extend cheaper borrowing for councils and making all land sold to social housing providers VAT free," and allocated an additional £1.5 billion to the social and affordable housing programme.
Industry reaction and outlook
Scott Clay, director of private clients at Together, welcomed the confirmation of an income cap of £110,000 per household outside of London for the Your First Home scheme, saying it means "the initiative has more of a shot at being effective." However, he noted a "geographic disparity," with those in the London commuter belt potentially missing out on the capital's £140,000 income cap while facing higher house prices in the south-east.
Etchells advised first-time buyers to focus on building a deposit and to examine the new schemes when they come into effect. "Speak to your finance provider, whether it's a broker, a bank, or a lender like Together that can help you," he recommended. "They can help you understand how the property purchasing process works."
