Your First Home: the new 2.5% deposit scheme, explained
The government has announced a new scheme for first-time buyers in England: a 2.5% deposit, with a 20% government loan towards a new-build. The details that decide whether it helps you come at the Budget on 28 October 2026. Until then, this is what's known and what it does to your numbers.
Reviewed 28 September 2026 · Information, not advice.
What's been announced
On 26 September 2026 the government announced Your First Home, an equity loan scheme for first-time buyers in England. You put down a 2.5% deposit, the government lends you 20% of the price, and a normal mortgage covers the rest.
It's only for new-build homes from developers who sign up to the scheme. The loan is interest-free at first, and there will be a household income cap and local price caps to aim it at people who need it. The government hasn't said yet what the caps are, how long the interest-free period lasts or when you can apply. It says those details will come at the Budget on 28 October 2026.
What it would mean for you
Put in the price of a new-build to see how the deposit, government loan and mortgage would split.
What it does to the numbers
Take a £300,000 new-build. Your deposit would be £7,500, the government loan £60,000 and your mortgage £232,500. With a normal 95% mortgage you'd need £15,000 down and borrow £285,000.
Borrowing less means paying less. At the same interest rate, the smaller mortgage costs about 18% less each month, and lenders usually charge a lower rate on a smaller mortgage. It also cuts the income you need: a lender working to 4.5 times income would want about £51,700 a year for £232,500, against about £63,300 for £285,000.
The catch: it's a loan, and the terms aren't out yet
The 20% isn't a gift. It's a loan you'll pay back, and the terms haven't been published. The old Help to Buy scheme is the closest guide: no interest for 5 years, then 1.75% a year of the amount you borrowed, with the rate rising every April after that.
Help to Buy was also repaid as a share of the home's value, not the amount borrowed. Someone who borrowed £40,000 (20%) on a £200,000 home and later sold for £250,000 paid back £50,000. If Your First Home works the same way, what you owe goes up when house prices do.
And a new-build can be worth less once it's no longer new. With only 2.5% of your own money in, there's little cushion if prices dip, which can make it harder to remortgage or move.
Not the same as First Homes
First Homes is a separate scheme with a confusingly similar name. It sells new-builds at a discount of at least 30%, and the discount stays with the home when it's sold on. Your First Home is a loan you repay, not a discount. If a developer mentions either, check which one they mean.
What to do now
You can't apply yet, but you can get ready. Run your own numbers in the calculator above, check your credit file, and keep saving: you'll need cash for the solicitor, survey and moving costs on top of any deposit.
If you're house-hunting now, don't count on the scheme until the Budget confirms it and the developer confirms they've signed up. We'll update this guide when the details are out.
Run your own numbers
Common questions
- When can I apply for Your First Home?
- Not yet. The government says the details, including when it opens, will be set out at the Budget on 28 October 2026.
- Is Your First Home the same as Help to Buy?
- It's similar. Help to Buy also lent up to 20% of a new-build's price (40% in London), but needed a 5% deposit. Your First Home is expected to need 2.5% down, with a household income cap and local price caps.
- Can I use it on an older home?
- No. It's only for new-builds from developers who have signed up to the scheme.
- Does it cover Scotland, Wales or Northern Ireland?
- No. Your First Home is for England only.