First-time buyers in UK could be offered a new route into home ownership with a deposit of just 2.5% under a government-backed scheme announced by Prime Minister Andy Burnham.,
The Your First Home scheme is designed to help first-time buyers who struggle to save a large deposit, particularly those without financial support from family.
Under the proposed scheme, eligible buyers would be able to purchase a qualifying new-build home with a deposit of 2.5%. The government would provide an equity loan worth up to 20% of the property’s value to help fund the purchase.
The equity loan is expected to be interest-free for an initial five-year period, with the government saying the scheme will be confirmed in the October Budget.
How the 2.5% deposit scheme would work
The government has used a £230,000 property as an example of how the scheme could help a first-time buyer.
A 2.5% deposit on a £230,000 home would be £5,750. The buyer could potentially receive an equity loan of up to £46,000, equivalent to 20% of the property’s value.
The remaining 75% could be covered by a mortgage, subject to the buyer meeting the lender’s affordability and eligibility requirements.
The £230,000 example is based on the national average price for a starter home cited from Rightmove.
The government has not yet published all of the scheme’s final eligibility conditions. Questions including age restrictions and the precise property-price limits have been among the details still awaiting confirmation.
Reuters reports that the government is expected to introduce household income limits and local property-price caps to target support at buyers who need it.
Scheme aimed at buyers without family help
Burnham said the policy was intended to assist people who cannot rely on financial support from parents or other family members when buying their first home.
The government says high housing and living costs have made it increasingly difficult for some young people to save enough for a conventional deposit.
Burnham said the scheme would also be intended to give housebuilders greater confidence to deliver new homes.
Housing developers are expected to contribute towards the running costs of the programme, while funding is expected to come partly from reprioritised government budgets.
New scheme revives elements of Help to Buy
The proposal has similarities with the former Help to Buy equity-loan programme.
Help to Buy was introduced in 2013 and allowed eligible buyers to purchase newly built homes with a 5% deposit, with an equity loan contributing up to 20% of the purchase price outside London.
The later version of the programme was restricted to first-time buyers and introduced regional property-price limits.
An evaluation of Help to Buy found that more than 387,000 properties were purchased through the programme, including around 328,000 purchases by first-time buyers.
The evaluation concluded that Help to Buy had supported some people into home ownership but had not removed affordability barriers for first-time buyers in areas where housing was already relatively expensive.
The government says Your First Home will build on lessons from previous equity-loan schemes while targeting support at buyers who need it.
Concerns over additional borrowing
The announcement has also prompted criticism from the opposition.
Conservative shadow housing secretary Katie Lam argued that the scheme could result in first-time buyers taking on more debt and questioned the potential effect of developer contributions on new-home prices.
Those concerns are political claims about the likely effects of the policy rather than established outcomes. The scheme has not yet been implemented, so its effect on house prices, borrowing and housing supply cannot yet be measured.
The Home Builders Federation, meanwhile, welcomed the announcement and said it had previously called for measures to improve access to home ownership.
Key details still to be confirmed
The government has announced the broad structure of Your First Home, but several important details remain outstanding.
These include:
- Final eligibility requirements
- Any age restrictions
- Household income limits
- Local property-price caps
- The precise repayment arrangements for the equity loan
- How buyers will apply
- Which new-build properties will qualify
The government is expected to provide further details in the 28 October 2026 Budget. Reuters reports that the equity loan would need to be repaid on the sale of the property, within 25 years or alongside repayment of the main mortgage.
For prospective buyers, the 2.5% deposit could reduce the amount of money needed upfront, but it would not remove the need to pass mortgage affordability checks or cover other costs associated with purchasing a home.
The scheme therefore represents a proposed new route into home ownership rather than a guarantee that every first-time buyer will be able to purchase with a 2.5% deposit.
