Government launches ‘Your First Home’ scheme with deposits from 2.5%

For many first-time buyers, saving a deposit is one of the biggest barriers to getting onto the property ladder. The Government’s new Your First Home scheme aims to tackle that, allowing eligible buyers in England to purchase a new-build home with a deposit starting at just 2.5%.

Backed by £4.7 billion of Government funding over five years, the scheme is expected to open for applications in February 2027.

How will it work?

Under the scheme, an eligible buyer will contribute a deposit of at least 2.5%, with the Government providing a 20% equity loan. The balance will be funded by a repayment mortgage from a participating lender.

For example, on a property costing £300,000, a buyer could contribute:

• £7,500 deposit;

• £60,000 Government equity loan; and

• £232,500 mortgage.

This compares with a £15,000 deposit and £285,000 mortgage if purchasing the same property with a conventional 95% mortgage.

Who will be eligible?

The scheme is aimed at first-time buyers purchasing an eligible new-build property in England as their main home.

Household income will normally be limited to £110,000 outside London and £140,000 in London, and properties must fall within locally determined price caps. Buyers will also need to satisfy the usual affordability and credit requirements of a participating mortgage lender.

Full eligibility criteria are still to be published.

What happens to the Government loan?

This is an important point for buyers to understand. The Government’s contribution is an equity loan, rather than a conventional fixed loan.

If the Government initially contributes 20% of the purchase price, the amount ultimately repayable will generally reflect 20% of the property's value when the loan is repaid. This means that if the property increases in value, the amount repayable will increase too. If its value falls, the repayment will reduce.

The loan will be interest-free for the first five years. Interest will then be charged at 1.5% in year six and 3% from year seven.

Is Your First Home right for you?

For buyers who can afford the ongoing costs of owning a home but have struggled to save a larger deposit, the scheme could provide a valuable new route onto the property ladder.

However, the headline 2.5% deposit is only part of the picture. Buyers should consider the affordability of their mortgage and other homeownership costs, as well as the longer-term implications of the equity loan.

With applications expected to open in February 2027, prospective buyers should keep an eye out for the detailed eligibility rules and participating developers and lenders.

Our Residential Property team can advise first-time buyers on the legal aspects of purchasing a new-build home and guide them through the conveyancing process from reservation to completion.