Your First Home scheme: what the new 2.5% deposit scheme could mean for first-time buyers
Saving for a deposit is often the biggest hurdle for first-time buyers. So it's no surprise the government's announcement on Saturday 26 September 2026 has caught a lot of attention.
A new scheme, called Your First Home, is expected to let first-time buyers in England buy a new-build home with a deposit of just 2.5%. It's due to be confirmed at next month's Budget.
It sounds like great news, and for many people it could be. But as with any scheme, there's more to it than the headline figure. Here's what we know so far, how it could work, and what to think about before you get your hopes up or rule it out.
What we know so far
At the moment, all we have is the government's initial announcement. Based on that, the scheme is expected to:
Be available to first-time buyers in England
Apply only to new-build homes bought from developers who have signed up to the scheme
Let you buy with a 2.5% deposit, backed by a 20% government equity loan
Include an initial interest-free period on the equity loan
Have a household income cap and local property price caps, so help goes to the people who need it most
Ask developers to pay a contribution when they sign up
What we don't know yet: the income cap, the price caps, how long the interest-free period lasts, what you'll pay after it ends, and when the scheme will open. The Chancellor is expected to confirm these at the Budget next month. We'll update this post once they're published.
How it could work: an example
Let's say you're buying a new-build home for £200,000. Here's how Your First Home might compare with a standard 95% mortgage.
Your First Home (expected)
Your deposit: £5,000 (2.5%)
Government equity loan: £40,000 (20%)
Your mortgage: £155,000 (77.5%)
Standard 95% mortgage
Your deposit: £10,000 (5%)
Government equity loan: none
Your mortgage: £190,000 (95%)
There are two things to take from this.
First, you need half the deposit. Second, your mortgage is smaller and sits at a lower loan-to-value (77.5% rather than 95%). Lower loan-to-value mortgages often come with lower interest rates. That, plus borrowing £35,000 less, is why the government says buyers could save hundreds of pounds a month.
The catch is that the £40,000 equity loan still has to be paid back eventually. We cover that below.
This example is for illustration only. It doesn't include interest rates, fees or the cost of the equity loan after any interest-free period, because those haven't been confirmed.
The positives
You could buy sooner. Saving 2.5% instead of 5% or 10% could take years off your plans. That matters if rent is making saving hard.
Lower monthly mortgage payments. A smaller mortgage at a lower loan-to-value should mean lower monthly payments than a 95% mortgage on the same home.
A breathing space at the start. The equity loan is expected to be interest-free at first. That gives you time to settle in, cover the costs of moving and get used to running a home.
A brand-new home. New builds are usually more energy efficient than older homes and come with a warranty, which can help keep running costs down.
Targeted help. The income and price caps are designed to make sure support goes to people who couldn't buy otherwise.
Things to think carefully about
It's only for new builds. You won't be able to use it on an older home, and only developers who sign up will take part. That could limit where you can live and what you can buy.
The equity loan isn't free money. It's a loan that has to be repaid, usually when you sell or remortgage. Under the previous Help to Buy scheme, the amount you repaid was a share of the home's value at the time, not the amount you originally borrowed. If this scheme works the same way and your home goes up in value, you'd pay back more.
Costs after the interest-free period. We don't yet know how long the interest-free period will last or what you'll pay afterwards. Under the old scheme, fees started after five years and went up every year. It's worth planning for this from day one.
You'll have very little equity at first. With a 2.5% deposit, even a small fall in house prices could leave you owing more than your home is worth. That can make it harder to remortgage or move.
New-build prices. New homes often sell at a premium and can be worth less when you come to resell them. Getting an independent valuation and comparing local prices is sensible.
You'll still need other money. Solicitor's fees, surveys, moving costs and furnishing a new home all add up, so a 2.5% deposit isn't the only cost.
Nothing's confirmed yet. The details could change at the Budget, so it's worth waiting before making big decisions.
Lessons from the previous Help to Buy scheme
Your First Home isn't the first scheme of its kind. The Help to Buy equity loan ran in England from 2013 until it closed to new applications in 2022. It helped hundreds of thousands of people buy a home, and their experience shows what to expect.
Under Help to Buy, buyers put down a 5% deposit and the government lent up to 20% of the price (up to 40% in London). The loan was interest-free for the first five years.
When buying
What worked well
Buyers needed a smaller deposit, so many got on the ladder years earlier than they otherwise could have
A smaller mortgage at a lower loan-to-value often meant better rates and lower monthly payments
Five interest-free years gave people time to settle in, build savings and plan ahead
What caused problems
It only applied to new builds, which often cost more than similar older homes nearby
Some buyers felt they paid too much, and critics argued the scheme helped push up new-build prices
Some new-build houses were sold as leasehold, with ground rents that later caused problems for owners
When selling or remortgaging
What worked well
If the home went up in value, the owner's own share of that growth went up too
Owners could repay the loan in stages (known as staircasing) to own more of their home over time
Many lenders accepted Help to Buy remortgages, so owners could move to a new mortgage deal once their first one ended
What caused problems
The loan was repaid as a share of the home's value at the time, not the amount borrowed. On a home that rose in value, owners paid back more than they borrowed
After five years, an annual fee started and went up each year. Some owners hadn't planned for it
Repaying the loan meant paying for an independent valuation, plus legal and admin costs
Remortgaging needed approval from the scheme administrator, and some lenders didn't offer Help to Buy remortgages, which reduced choice
Some owners found it hard to sell. Buyers of a resale home couldn't use Help to Buy, so they were competing with nearby new builds that could
Where prices fell or didn't grow, a small deposit left some owners with little or no equity, which made moving difficult
The government hasn't yet confirmed whether Your First Home will work in the same way, but these are the right questions to ask when the details are published.
What it could mean in Greater Manchester
There's a lot of new-build development across Greater Manchester, from city-centre apartments to family homes in areas like Salford, Wigan, Bury and Trafford. That could make Your First Home a real option for many local first-time buyers.
Whether it works for you will depend on the local price caps, which haven't been announced yet, and on which local developers sign up. We'll share more once the details are confirmed.
What to do now
You don't need to wait for the Budget to start getting ready. Here's what you can do now:
Keep saving. A bigger deposit gives you more options, whether or not you use the scheme.
Check your credit file. Correct any mistakes and make sure you're on the electoral roll.
Work out a budget. Look at what you spend each month so you know what you can comfortably afford.
Compare your options. Your First Home won't suit everyone. A standard mortgage, a 95% mortgage or a different property could be a better fit.
Speak to an adviser. A mortgage adviser can look at your situation and help you understand whether the scheme is likely to work for you.
Frequently asked questions
Is Your First Home the same as Help to Buy?
It's similar. Both use a government equity loan on new-build homes. The main difference is that Your First Home is expected to need a 2.5% deposit, compared with 5% under Help to Buy. The full terms won't be known until the Budget.
Can I use it to buy an older property?
No. Based on the announcement, it's only for new-build homes from developers who have signed up.
Is it available outside England?
The announcement only covers England.
When can I apply?
We don't know yet. The Chancellor is expected to set out the timings at the Budget next month.
Will I qualify?
There will be a household income cap and local price caps. Until they're confirmed, we can't say for sure who will qualify.
Do I have to pay the equity loan back?
Yes. The equity loan is expected to be interest-free at first, but it's still a loan that has to be repaid.
Thinking about buying your first home?
Whether Your First Home turns out to be right for you or not, it's never too early to start planning. At Manchester Independent Mortgages, we help first-time buyers across Greater Manchester understand their options in plain English.
If you'd like a free, no-obligation chat about your plans, get in touch and one of our advisers will be happy to help.
This article is for general information only. It isn't financial advice and is based on the government's announcement of 26/09/2026, so details may change. Always check the latest scheme rules and lender criteria before making a decision.
Your home may be repossessed if you do not keep up repayments on your mortgage.