Your First Home: What the New 2.5% Deposit Scheme Means for First-Time Buyers
Saving a deposit has long been the biggest obstacle for first-time buyers. With mortgage rates still higher than many hoped, the government's announcement of a new support scheme, Your First Home, has unsurprisingly attracted plenty of attention.
The headline is simple. Eligible first-time buyers could purchase a new-build home in England with a deposit of just 2.5%. The full detail is expected in the Budget on 28 October, but there is already enough information to understand how it could work and what buyers should be thinking about now.
What is Your First Home?
Your First Home is a proposed equity loan scheme for first-time buyers purchasing new-build properties from participating developers. Based on the government's announcement, buyers can expect:
A minimum deposit of 2.5%
A government-backed equity loan of 20% of the property price
An interest-free period on that equity loan for an initial term
Household income caps and local property price caps, with the figures still to be confirmed
The remaining 77.5% would be funded through a standard mortgage from a participating lender.
How the numbers could work
Rightmove puts the average asking price of a typical first-time buyer home (up to two bedrooms) at £225,199. Here is how a purchase at that price might be funded under the new scheme, compared with a conventional 5% deposit mortgage.
| Funding | Your First Home (expected) | Standard 5% deposit mortgage |
|---|---|---|
| Buyer's deposit | £5,630 (2.5%) | £11,260 (5%) |
| Government equity loan | £45,040 (20%) | None |
| Mortgage | £174,529 (77.5%) | £213,939 (95%) |
| Total purchase price | £225,199 | £225,199 |
Halving the deposit and borrowing less from a lender could make a real difference to affordability. The government suggests the interest-free period could save buyers hundreds of pounds a month compared with a standard 95% mortgage, although the actual figure will depend on the property price, mortgage rates and, crucially, what happens once interest on the equity loan begins.
Familiar territory: how it compares with Help to Buy
If this sounds familiar, it should. Help to Buy ran in England from 2013 to 2023 and worked on a very similar basis. Your First Home appears to follow the same model, with a few key differences.
| Help to Buy (final version) | Your First Home (expected) | |
|---|---|---|
| Minimum deposit | 5% | 2.5% |
| Equity loan | Up to 20% (40% in London) | 20% |
| Interest-free period | First five years | Initial period, length to be confirmed |
| Property type | New-build only | New-build only |
| Targeting | Regional price caps | Local price caps and household income caps |
Why a survey still matters on a new-build
A lower deposit makes buying easier, but it doesn't change what you are buying. New-build homes are not automatically free of problems, and buyers using a scheme like this will often be stretching to their limit with very little equity of their own in the property.
That is exactly why independent advice matters. An inspection before completion can identify defects in finishes, fittings, insulation, drainage and more while the developer is still obliged to put them right. It is far easier to have issues resolved before you move in than to chase them afterwards.
There is a longer-term consideration too. Equity loans are repaid as a percentage of the property's market value at the time, not the original purchase price. Under Help to Buy, homeowners needed a valuation from an RICS-registered surveyor when redeeming their loan, and a similar requirement under Your First Home seems likely. Keeping your home in good condition, and understanding its value, will directly affect what you eventually pay back.
What we are still waiting to hear
Several important details will only become clear at the Budget, including:
How long the interest-free period will last
The interest rate charged once it ends
Local property price caps and income thresholds
Which lenders and developers will take part
When and how buyers can register
Until then, existing options such as Shared Ownership, First Homes and low-deposit mortgages remain available, and some buyers may find these suit them better than waiting.
Our view
Any measure that helps more people into home ownership is welcome, and a 2.5% deposit could open the door for buyers who have been priced out for years. But the smaller the deposit, the more important it becomes to know exactly what you are buying.
If you are planning to buy a new-build, whether through Your First Home or any other route, speak to the team at Carpenter Surveyors about a snagging inspection or survey before you complete.
This article is for general information only and does not constitute financial advice. Scheme details are subject to confirmation at the Budget on 28 October 2026. Please speak to a regulated mortgage adviser before making any financial decisions.