Say you've got £7,000 saved and you're wondering if it's enough to buy anything. For most homes today, honestly, not yet. From 2027, for some first-time buyers looking at a new-build in England, it could be.
Your First Home is a new government scheme for first-time buyers in England. You put down a deposit of at least 2.5%, the government lends you 20% of the price as an equity loan, and a repayment mortgage covers the rest. It's for new-build homes only. The government confirmed the details at the Budget on 28 October 2026 and published the local price caps on 3 November.
The price caps were published on 3 November 2026. Every council area in England has its own maximum price, and you can check yours in seconds with my postcode checker.
Check the price cap in your area →What is the Your First Home scheme?
The government announced it on 26 September 2026. Prime Minister Andy Burnham said too many young people were struggling with the cost of housing, with many giving up hope. The full details followed at the Budget on 28 October.
It's aimed at first-time buyers who would struggle to buy without help. And the thing that stops most of them isn't the monthly payment. It's the deposit. Plenty of people pay more in rent than a mortgage would cost, and still can't save a lump sum fast enough. Especially if there's no bank of Mum and Dad to call on.
There's a second reason for it too, and the government is open about it. It says the new-build market faces headwinds from international economic pressures and rising construction costs, and it wants the scheme to help housebuilding.
One thing people ask straight away: does the government own part of my home? No. You own it from completion. GOV.UK says the government won't be a joint owner or your landlord. It's a loan.
Your First Home at a glance
How does the 2.5% deposit mortgage work?
Instead of borrowing nearly everything from one lender, the price is split three ways.
- You put down a deposit of at least 2.5% of the price.
- The government lends you 20% of the price as an equity loan.
- A mortgage lender lends the rest, 77.5% if your deposit is 2.5%, after its normal checks.
The equity loan is interest free for the first 5 years. Then you pay interest of 1.5% in year 6 and 3% a year from year 7. You pay that interest on top of your mortgage, and it doesn't reduce the loan.
GOV.UK gives an example. Take a £300,000 home and a 30 year repayment mortgage at 5%. The Your First Home mortgage would be about £1,248 a month. A 95% mortgage on the same home would be about £1,530. Then the loan interest arrives: about £75 a month in year 6 and £150 a month from year 7, taking the total to about £1,398.
A small catch in that example. It uses the same 5% rate for both mortgages. In real life a 95% mortgage usually costs more than one at a lower loan to value, so the gap could be bigger or smaller depending on the rates on offer when you buy.
What that looks like in real numbers
| Home price | 2.5% deposit | 20% loan | 77.5% mortgage |
|---|---|---|---|
| £200,000 | £5,000 | £40,000 | £155,000 |
| £250,000 | £6,250 | £50,000 | £193,750 |
| £300,000 | £7,500 | £60,000 | £232,500 |
| £350,000 | £8,750 | £70,000 | £271,250 |
For context, first-time buyers in England paid £246,042 on average in August 2026, according to the UK House Price Index. A 2.5% deposit on that is about £6,150. A 5% deposit would be about £12,300. So the cash you need up front roughly halves.
The deposit isn't the only money you need. There are legal fees, surveys, mortgage fees and moving costs too. Budget for those separately.
Calculator: what would you need?
Type in a new-build price to see the split. The second part shows how the amount you repay moves with your home's value. GOV.UK confirms it works like the old Help to Buy loan: borrow 20% of the price, and you normally repay 20% of what the home is worth when you pay it back, based on an independent valuation.
Your First Home rough guide calculator
Illustration only, based on the government guidance updated 3 November 2026.
With a normal 95% mortgage on the same home, you'd need a £12,500 deposit and a mortgage of £237,500.
What might you repay?
The loan is repaid as a percentage of the home's value at the time, not the amount borrowed. Move the slider to see how that works.
Home worth £275,000, so 20% to repay is £55,000, compared with £50,000 borrowed.
That's £5,000 more than you borrowed.
Who can use the Your First Home scheme?
This is what GOV.UK confirms so far.
- First-time buyers only.
- New-build homes only, bought from a developer that has signed up to the scheme.
- England only.
- The home must be your main home.
- Household income of £110,000 or less, or £140,000 or less in London.
- The price must be within the local price cap for that council area. Check the cap for your area here.
- You need a repayment mortgage from a lender taking part, and you'll go through its normal affordability and credit checks.
Developers pay to take part, not you. They pay a fee on each sale: 1% on their first 100 homes a year, 3% on the next 150, and 4% after that.
The smaller deposit doesn't change the lender's sums. You still have to pass affordability on the mortgage, and lenders typically lend up to about 4.5 times income. If you're new to all this, my first-time buyer guide walks through the whole process from the start.
What don't we know about Your First Home yet?
Much less than before the Budget. GOV.UK says the rest will be published before applications open, including:
- the full eligibility rules
- which developers and lenders are taking part
- how the loan interest will be collected
- the repayment details: minimum repayments, valuations, any fees, and what happens when you sell or remortgage
The loan normally becomes repayable when you sell, and you can pay some or all of it back earlier. That much is confirmed.
The scheme has £4.7 billion over 5 years: £700 million in 2027 to 2028, then £1 billion a year. When it's gone, it's gone, so don't build your whole plan around getting a place.
How does Your First Home compare to Help to Buy?
If this sounds familiar, it should. The Help to Buy equity loan in England worked in a very similar way. It closed to new applications on 31 October 2022, and the last purchases had to complete by 31 March 2023. It isn't coming back. The table compares the new scheme with the final version of Help to Buy, which ran from 2021 to 2023.
| Help to Buy (2021 to 2023) | Your First Home (2027) | |
|---|---|---|
| Minimum deposit | 5% | 2.5% |
| Government loan | 5% to 20% (up to 40% in London) | 20%, including London |
| Your mortgage | At least 25% (usually 75%) | The rest, 77.5% with a 2.5% deposit |
| Property | New-build only | New-build only |
| Who could use it | First-time buyers only | First-time buyers only |
| Price caps | Regional, from £186,100 (North East) to £600,000 (London) | One for each local authority, from £215,000 to £650,000. Check yours |
| Income cap | None | £110,000, or £140,000 in London |
| Interest free | First 5 years | First 5 years |
| After that | 1.75% in year 6, rising every April by CPI plus 2% | 1.5% in year 6, then 3% a year from year 7 |
| Repaid as | A percentage of the home's value at the time | A percentage of the home's value at the time |
| Developers pay in | No | Yes |
The Help to Buy lesson people forget
With Help to Buy, the free bit ended after five years. In year six you paid 1.75% on the amount you originally borrowed, and the rate went up every April. On a £40,000 loan that was £58.33 a month to start with, and none of it touched the loan itself.
The loan was also repaid as a percentage of what your home was worth. Borrow 20% on a £200,000 home, sell it for £250,000, and you paid back £50,000, not £40,000. It worked the other way too. If the value fell, you paid back less.
Your First Home repays the same way. GOV.UK's own example: take a £300,000 home. If it's later valued at £320,000, you repay £64,000. At £280,000, you repay £56,000. The interest is simpler than Help to Buy, though: 1.5% in year 6, then a flat 3% a year from year 7, with no yearly rise announced. On a £60,000 loan that's about £75 a month in year 6 and £150 a month after that.
Is Your First Home better than a 95% mortgage?
It depends on you, and on the home. Here's how the two routes compare.
| 95% mortgage | Your First Home | |
|---|---|---|
| Deposit | 5% | 2.5% |
| Property | New or older homes | New-builds from signed up developers |
| Who | First-time buyers and movers | First-time buyers only |
| Borrowing | One mortgage | A mortgage plus a government loan |
| Monthly cost | Higher, as 95% rates usually cost more | Lower for the first 5 years, then loan interest is added |
If you'd rather buy an older house, Your First Home can't help. It's also not the only way in with a small deposit. There's the Lifetime ISA, shared ownership, the Freedom to Buy 5% deposit scheme, and some lenders will use your rent history instead of a deposit. I covered one of those in my Skipton Track Record guide.
What are the risks of a 2.5% deposit?
A small deposit gets you in sooner. It also leaves less room if things go wrong.
- Negative equity. With very little of your own money in the home, a fall in prices could leave you owing more than it's worth. That can make it harder to move or remortgage.
- The new-build premium. New-builds often cost more than similar older homes, and that extra can disappear once you're the second owner.
- Prices creeping up. Some in the industry worry that extra buying power aimed only at new-builds could push their prices up.
- Leasehold flats. Service charges and ground rent add to the monthly cost, so check them carefully.
- The cost later on. Loan interest starts in year 6, so your monthly outgoings will go up. Plan for that from day one, not in year five.
And one more question worth asking yourself. With a small deposit and two lots of borrowing, how would the bills get paid if illness or injury stopped your income for a few months? My guide could you pay your mortgage if you couldn't work? walks through it.
Not sure what some of these terms mean? My jargon buster explains them in plain English. And the new-build mortgages guide covers what's different about buying a new home.
What happens next with Your First Home?
- 26 September 2026Scheme announced by the government.
- 28 October 2026, the BudgetIncome caps, interest rates, repayment rules and timings confirmed.
- 3 November 2026Price caps published for every local authority. Check yours.
- By the end of December 2026Pre-registration opens. It doesn't commit you to buying.
- February 2027First applications.
- April 2027First homes bought through the scheme.
What you can do right now
- Keep saving. Aim for the 2.5% plus money for fees and moving.
- Check your credit file and make sure you're on the electoral roll.
- Check the price cap for the area you want with my price cap checker, then keep an eye on which developers sign up.
- Don't put your plans on hold just for this. The first sales aren't expected until April 2027, and other options exist today.
- Use my free calculators to get a feel for monthly payments and stamp duty.
If you want to talk through whether this, a 95% mortgage or something else fits you, DS Financial can help.
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The Short Version
- At least 2.5% deposit, a 20% government loan, and a repayment mortgage for the rest.
- First-time buyers, new-builds in England, household income up to £110,000 (£140,000 in London), within the local price cap.
- The loan is interest free for 5 years, then 1.5% in year 6 and 3% from year 7.
- You repay 20% of the home's value at the time, not 20% of what you paid.
- Applications are expected from February 2027.
Sources
- GOV.UK: Your First Home guidance (updated 3 November 2026)
- GOV.UK: Your First Home local authority price caps
- GOV.UK: New first-time buyer scheme to be confirmed at Budget
- GOV.UK: Help to Buy: Equity Loan
- GOV.UK: Homebuyers' guide to Help to Buy (2021 to 2023)
- GOV.UK: Help to Buy applications closure guidance
- GOV.UK: UK House Price Index, England, August 2026
- Welsh Government: Help to Buy Wales extended to March 2027
- ITV News: New Your First Home scheme
This article is for general information and education only. It isn't financial or mortgage advice and doesn't take your personal circumstances into account. Scheme details are based on GOV.UK guidance updated 3 November 2026. The full terms will be published before applications open. Your home may be repossessed if you do not keep up repayments on your mortgage.