Property News
Your First Home Scheme: 2.5% Deposit, But Not for Most Sellers
A 2.5% deposit and 20% government equity loan for first-time buyers sounds big, but it covers new-builds only and has no launch date until the 28 October Budget.
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The government has announced a new "Your First Home" scheme for England: first-time buyers will be able to buy a new-build home with a deposit of just 2.5%, topped up by a 20% government equity loan that starts with an interest-free period. The headline is bold, but the key details (income caps, price caps, how long the interest-free period lasts) won't be confirmed until the Budget on 28 October 2026, and because it only covers new-builds, it will not rescue your existing-home sale this autumn.
If you own a home and you're thinking of selling, here's the short version of my view: it's worth knowing about, it's not worth waiting for. I'll explain why below, what we actually know, what we don't, and how it could ripple through the market over the next couple of years.
- "Your First Home" is an equity loan scheme for first-time buyers in England buying new-build homes from participating developers.
- Reported structure: 2.5% deposit, 20% government equity loan, roughly 77.5% mortgage, with an initial interest-free period on the government loan.
- Household income caps and local price caps exist, but the figures have not been published. The Budget on 28 October 2026 is when detail is due.
- Because it is new-build only, most second-hand sellers won't see a direct buyer boost. Any benefit is indirect and slow.
- If you need to sell this autumn, plan around today's market, not a scheme that has no launch date yet.
What exactly has the government announced?
According to Rightmove's news coverage of the announcement, published on 29 September 2026, the scheme is aimed squarely at first-time buyers in England. It is a government-backed equity loan, which means the state lends you part of the purchase price of a new-build home rather than you borrowing every penny from a bank.
The reported building blocks look like this:
- A minimum 2.5% deposit from the buyer.
- A 20% equity loan from the government, with an initial period during which you pay no interest on it.
- A mortgage for the rest, which works out at up to 77.5% of the price.
- New-build homes only, bought from participating developers.
- England only. Wales, Scotland and Northern Ireland are not included.
- Caps on household income and on local property prices, with the actual limits still to come.
Rightmove's article put the average first-time buyer asking price at £225,199, which lets us do the sums. On a home at that price, 2.5% is roughly £5,630. The government equity loan would be about £45,040, and the mortgage would be around £174,530. Those are my calculations from Rightmove's average price figure, not official scheme numbers, and the real caps could change who qualifies for what.
- 2.5%minimum deposit reported
- 20%government equity loan
- 77.5%mortgage needed
- £5,630deposit on an average £225,199 first-time buyer home (our calculation)
The industry reaction has been warm but cautious. Alex Slater, Director of New Homes, was quoted in Rightmove's coverage saying: "Any measures that help more first-time buyers access home ownership are welcome, particularly at a time when new homes developers are facing some of the toughest market conditions in years." Trade coverage elsewhere has echoed the point that the real test will be whether smaller builders benefit as well as the big housebuilders, and whether planning and supply problems get fixed alongside the demand support.
When will the Your First Home scheme actually start?
Nobody can tell you yet, and that is the single most important fact in this story.
The full details are due at the Budget on 28 October 2026, according to Rightmove. Some commentators expect pre-registration to open before the end of 2026, but that is an expectation, not a confirmed date. A property law firm's guide to the scheme was careful to flag the launch date, the income cap, the local price caps, the length of the interest-free period and the rate after that period as all unconfirmed. I'd treat anything more specific than that as guesswork.
Government schemes of this kind also tend to take months to move from announcement to the first completed purchase. Developers need to sign up, lenders need to build the product into their underwriting, and conveyancers need to learn the paperwork. A first-time buyer who hears about this today and rings a developer tomorrow will most likely be told to wait.
How does it compare with Help to Buy?
It will inevitably be compared with Help to Buy, and the comparison is useful for working out what might happen next.
Help to Buy: Equity Loan in England was launched in 2013. The government lent buyers 20% of a new-build home's price (40% in London in later years), the buyer put down at least 5%, and the rest came from a mortgage. The loan was interest-free for the first five years. It closed to new applications in late 2022, with all purchases needing to complete by March 2023.
| Help to Buy (closed) | Your First Home (announced) | |
|---|---|---|
| Who could use it | First-time buyers (the later version) | First-time buyers only |
| Where | England | England |
| Type of home | New-build | New-build |
| Buyer deposit | 5% | 2.5% (reported) |
| Government loan | 20% (40% in London) | 20% (reported) |
| Interest-free period | 5 years | Not yet confirmed |
| Price and income caps | Regional price caps | Caps promised, figures not published |
| Status | Closed to new applications | Details due at the 28 October Budget |
Two things jump out. First, the deposit is halved, which matters because the deposit is the wall that most renters hit. Second, the structure is otherwise a close cousin of the old scheme. That is both reassuring and a warning. Help to Buy did help a lot of people into a first home. It was also criticised for supporting developers' prices, and for leaving some buyers unable to move later because they owed a government loan alongside a mortgage. Whether the new scheme learns from those criticisms depends on the fine print we don't have.
Why is the government doing this now?
Because the entry end of the market is stuck, and everyone in Westminster knows it.
Look at the numbers we've been tracking in these news pieces. Nationwide reported this week that annual house price growth had slowed to 0.8%. The Bank of England held Bank Rate at 3.75% in September, with three members voting for a rise rather than a cut. Mortgage approvals have dropped to a 32-month low according to the Bank of England's latest money and credit figures. That is a market where cautious buyers are staying away and mortgage costs are not falling quickly enough to tempt them back.
New-build developers feel this most. Their model depends on a steady stream of buyers who can get a mortgage on a brand-new property, often one with a premium attached. When demand softens, sites stall, and the government's housebuilding ambitions stall with them. A scheme that lowers the barrier to buying a new-build is a very direct way of nudging demand towards the thing the government most wants built. I don't say that cynically. It's a sensible policy aim. But it helps you understand who the scheme is really designed for: first-time buyers and developers, in that order.
Does this help me if I'm selling an existing home?
Mostly not, and anyone who tells you otherwise is selling something.
The scheme only applies to new-build homes. Your three-bed semi, your Victorian terrace, your 1990s detached house: none of those is eligible for a buyer using Your First Home. So the buyers who walk through your door this autumn will not be using this scheme. They will be using ordinary mortgages, savings, equity from their own sale, or a family contribution.
There is a longer, indirect story, though, and it's worth understanding.
- First-time buyers are the start of most property chains. A healthier first-time buyer market means more chains can begin.
- Renters who move into a new-build free up a rental home, which can reduce pressure on rents and, for some, make saving for a later purchase easier.
- If new-build sales pick up, developers can keep building, which supports overall housing supply.
- There is no launch date, so there is no effect on this autumn's market.
- New-builds don't sit in your chain. A buyer of a new-build usually isn't buying your home.
- Some buyers may simply choose a new-build instead of a second-hand home, which could take a little demand away from existing stock in the same price band.
- Income and price caps may exclude many buyers in higher-priced areas.
The last point in the "headwinds" column deserves more thought. In a local market with lots of new-build development nearby, a low-deposit scheme could pull some starter-home buyers away from older properties. If you own a two-bedroom flat or a small starter home near a big new development, keep an eye on what the developers are advertising. Competition for the same buyer is not something that shows up in national statistics.
Where will the scheme matter most across England?
The early commentary suggests the impact will be uneven. Because the scheme comes with local price caps, the benefit will depend heavily on how those caps are set.
Property News' coverage of the announcement suggested that London and Surrey are likely to see little change, even with the help on offer, because prices there are so far above what a capped scheme can cover. The cities that could see a proportionally larger effect are Manchester, Birmingham, Leeds, Liverpool and Newcastle, where new-build starter homes sit closer to the average first-time buyer budget. That is the commentary's expectation rather than an official forecast, but it fits with what we know about price levels.
That bar chart is my illustration of the direction of the commentary, not data. The widths show relative expected impact in a loose way and shouldn't be read as percentages. The honest answer is that nobody knows until the caps are published.
Why does this matter to you as a seller? Because the region you live in decides whether any of this touches your local market. If you're in Leeds or Manchester and there are new-build starter homes going up nearby, the scheme could eventually change the mix of buyers. If you're in Guildford, it probably won't. Our house prices guide gives a sense of how different the picture is by area, and it's worth reading before you decide how much any national policy matters to you.
What are the risks for first-time buyers using it?
You might wonder why a story about a first-time buyer scheme belongs in a homeowner news feed. The answer is that every seller needs a buyer, and the buyers of the next few years are the ones who will decide your price.
A 2.5% deposit sounds wonderful, but a few things need thinking about if you are advising a son, daughter or grandchild who might use it:
- The interest-free period ends. Under the old Help to Buy scheme, the loan began charging interest after five years. The new scheme's interest-free length and the rate afterwards haven't been announced. Buyers will need to know exactly what the loan costs from year six or whenever the free period ends.
- The loan is a share of the home, not a fixed sum. Reporting suggests, though doesn't confirm, that repayment would likely be a percentage of the home's value at the time. If the home's value rises, so does the amount owed. If it falls, the amount owed falls too.
- A small deposit means a big mortgage on a new-build. New-build homes sometimes carry a price premium over similar second-hand homes that can fade after purchase. With a 2.5% deposit, there is very little cushion if values slip.
- The mortgage still has to be approved. The scheme helps with the deposit. It does not remove affordability checks. Lenders still have to be satisfied that the buyer can afford repayments at today's rates.
None of that is a reason to dismiss the scheme. For a household stuck in rented accommodation with a decent income and a tiny deposit, it could be life-changing. But it is a reason for buyers to read the detail carefully once it is published, and a reason for sellers to realise that some of those buyers could be financially stretched.
How does this fit with the rest of the autumn market?
The announcement lands in a market that is cooling, not collapsing. Here is the backdrop, using figures from earlier in our news coverage and the original sources:
| Indicator | Latest reading | Source |
|---|---|---|
| Annual house price growth | 0.8% | Nationwide |
| Bank Rate | 3.75% (held in September, three members voted for a rise) | Bank of England |
| Mortgage approvals | 32-month low | Bank of England |
| Typical first-time buyer asking price | £225,199 | Rightmove |
Put those together and you can see why the government wants to do something. Prices are barely growing. Approvals are weak. The Bank of England isn't about to rescue the market with rapid rate cuts. A policy that helps first-time buyers is one of the few levers the Treasury can pull that doesn't rely on the Bank.
The Budget is also the moment when other housing taxes might be announced or confirmed. We've covered the speculation around property taxes and the Budget in recent days, from the mansion tax debate to rumours around capital gains tax. This first-time buyer scheme is one piece of a bigger Budget puzzle. Treat the 28th as a day when several things might move at once.
What should you do if you want to sell this autumn?
Here is my plain advice, as a friend who has watched a lot of these announcements come and go.
Don't pause your plans waiting for a scheme that doesn't exist yet. If you are ready to sell, the buyers you need are out there now, using ordinary mortgages. Every week you wait is a week of mortgage payments, bills and uncertainty. A scheme with no launch date, aimed at buyers who can't buy your home anyway, is a poor reason to delay.
Price for the market you can see. With house price growth at 0.8% and buyers cautious, an optimistic asking price is the most common reason homes stall. Start with a realistic number. Our guide on how much your house is worth walks through how to get an honest figure rather than a flattering one.
Watch the Budget, but don't bet on it. If the 28 October announcements include major changes to stamp duty, capital gains tax or property taxation, those could affect your sale far more than a new-build scheme. Have your plan ready to adjust, not frozen.
Check your chain. If you are buying and selling, your chain is probably the biggest risk to your timetable. Our guide on how to break the house chain explains the options if one link goes wrong. The more certain your buyer is, the better.
Know your options if speed matters. If you need to sell quickly, whether because of a job move, a probate sale or a purchase you don't want to lose, a conventional sale at full asking price isn't the only route. A fast sale to a cash buyer typically trades some price for certainty and speed. Whether that trade makes sense for you depends entirely on your circumstances, and it's worth comparing before you decide.
Is the scheme good news or political spin?
A bit of both, and I'd rather say so plainly.
The good news is real. A 2.5% deposit lowers a genuine barrier. Anyone who has watched a young couple save for years and still fall short will understand that. If the caps are generous and the interest-free period is long, it could help a lot of people start their housing journey.
The spin is in the framing. "Get on the property ladder" is a lovely phrase, but this scheme only gets you onto one specific rung: a new-build, from a participating developer, in a capped price band. It is not a general first-time buyer boost. It won't directly support the second-hand market where most sales, and most sellers, sit. And until the Budget, it is an announcement of an intention, not a product you can apply for.
There's one more thing I'd say. Demand-side schemes have a history of nudging prices upwards at the margin, because when buyers can borrow more or save less, sellers can ask for a little more. That doesn't mean it will happen here. But when a scheme's success depends on developers taking part, it is fair to ask who captures the benefit. The people who should gain are the first-time buyers. Whether they do will depend on the final design.
What could go wrong, and what could go right?
Planning for different outcomes is better than guessing one.
If the Budget delivers generous terms: Expect a rush of interest from first-time buyers in new-build developments, especially in northern and Midlands cities. Developers may see sales pick up. Existing-home sellers in the same price band could notice slightly more competition for starter buyers, but the wider chain effects would take time to show up.
If the caps are tight: The scheme could end up helping a smaller group than the headline suggests, mostly in lower-priced regions. The market effect would be modest.
If the launch slips: It's not unusual for schemes to arrive later than first indicated. Buyers who waited for it may be disappointed, and some might re-enter the second-hand market after a delay. That is an argument for keeping your plans flexible.
If other Budget measures overshadow it: A big tax announcement could change the market conversation overnight. This is why I say watch the 28th as a whole, not just this one scheme.
What does the outlook look like for the next six months?
I don't have a crystal ball, and I distrust anyone who claims to. But I can lay out what the evidence suggests.
In the near term, nothing about this announcement changes the fundamentals for a seller. Buyers are cautious, mortgage approvals are weak, and prices are barely rising. That is the market you will be selling into this autumn and winter, scheme or no scheme.
Over the medium term, a well-designed first-time buyer scheme could help the market's foundations. First-time buyers are the people who start chains, and a more active start to those chains is good for everyone further up. But the benefit is slow, and it is concentrated on new-build stock, which is a minority of total sales.
The sensible position is neither panic nor euphoria. Treat the scheme as one of several things that could shift the market in 2027, and keep your own decisions grounded in your own circumstances: when you need to move, what you need to achieve, and how much certainty matters to you.
Frequently asked questions
What is the Your First Home scheme?
It's a government-backed equity loan scheme for first-time buyers in England buying new-build homes from participating developers. Buyers put down a 2.5% deposit, the government lends 20% of the price with an initial interest-free period, and a lender provides the remaining mortgage of around 77.5%.
When does Your First Home start?
There is no confirmed start date. Full details are expected at the Budget on 28 October 2026, and some commentators expect pre-registration before the end of the year, but that has not been confirmed.
Can I use it to buy a second-hand house?
No. The scheme has been announced for new-build homes only, bought from participating developers.
Does it apply in Scotland, Wales or Northern Ireland?
No. It's an England-only scheme.
Will the scheme push up house prices?
It's too early to say. Demand-boosting schemes can nudge prices at the margin, but this one is limited to new-builds within price caps that haven't been published. The effect on the wider second-hand market is likely to be small and slow.
Should I wait for the scheme before I sell my home?
I wouldn't. The scheme only covers new-builds, so it isn't designed to bring buyers to existing homes, and it has no launch date. If you're ready to sell, plan around today's market.
How is it different from Help to Buy?
Both are equity loan schemes for new-builds with a 20% government loan and an interest-free start. Help to Buy needed a 5% deposit and gave a five-year interest-free period. Your First Home is reported to need only 2.5%, and its interest-free period hasn't been confirmed. Help to Buy closed to new applications in late 2022.
What happens if I need to sell quickly rather than wait?
You have options beyond a standard estate agent sale. A fast sale to a cash buyer can offer speed and certainty in exchange for a lower price, and an assisted sale aims for market value with support. Comparing offers costs nothing and shows you what is realistic for your home.
The bottom line
Your First Home is a meaningful announcement for people trying to buy their first new-build, and an interesting signal of where government housing policy is heading. For a homeowner who needs to sell, it is background noise until the details land on 28 October, and probably for a good while afterwards.
Focus on what you can control: a realistic price, a well-presented home, a buyer who is properly lined up, and a plan for what happens if your chain wobbles. If you'd like to see what your home could achieve, from a conventional sale through to a quick cash offer, you can compare offers with Ready Steady Sell in a few minutes. It's free, there's no obligation, and you'll know where you stand before the Budget changes the conversation.
Lisa Hayes is the founder of Ready Steady Sell, an independent UK quick-house-sale comparison service. This article is general information, not financial or legal advice. Details of the Your First Home scheme are subject to confirmation at the Budget, so check official sources before making decisions.
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