Budget 2026: New 'Your First Home' homebuying scheme to launch in England

The scheme is designed to make initial mortgage costs cheaper

The premise of the Your First Home scheme is very similar to the Help to Buy equity loan scheme, which ran between 2013 and 2022.

Similar to Help to Buy, Your First Home will work by providing homebuyers with an equity loan of 20% of the property price, which is interest-free for the first five years. This will help homebuyers in two key ways:

• It'll mean some people who previously couldn't get a mortgage now CAN. For example, those with a deposit that's so small they were unable to get a mortgage full stop.

• It'll make the initial cost of homeownership cheaper. Primarily because you'll be able to access cheaper mortgage rates, as the size of the mortgage you need will be smaller. Additionally, because the equity loan will be interest-free for the first five years, it should help with initial monthly costs.

For example, let's say you hope to buy a £200,000 home. If you've got a £10,000 deposit, that means your loan-to-value (LTV – the size of the mortgage compared to the value of the property) is 95%, a level at which mortgage rates are typically expensive. But with a 20% equity loan, this would bring your LTV down to 75%, where interest rates are cheaper.

See the table below for how LTV impacts the cost of a mortgage:

Repayment terms differ for both the capital and the interest

There are two elements to repaying the equity loan: the interest and the capital borrowed.

1. Repaying the interest. The equity loan will be interest-free for the first five years.
   
   After those five years, you'll start repaying interest – 1.5% from year six, then 3% from year seven onwards. This means your monthly repayments will increase after five years, so factor this in.

2. Repaying the equity loan (the money you borrowed). You don't have to repay the actual equity loan (the money you've borrowed) until you sell your home, though you can repay it sooner if you want to and can afford it. Where you don't sell, the equity loan must be repaid before you fully repay your mortgage.
   
   Importantly, when it comes to repaying the money borrowed, what you repay can go up or down depending on property prices.
   

   Let's say you bought a £300,000 home with a £60,000 equity loan (equivalent to 20%). By the time you repay the equity loan, if the value of your home has increased to £320,000 then the new value of the equity loan is £64,000 (20% of £320,000). Alternatively, if your home has decreased in value to £280,000, the value of the equity loan would be £56,000.
   
   More details about how you can repay the equity loan will be announced by the end of the year.

Many (though not all) first-time buyers can use the scheme

There are a number of restrictions around who can use the Your First Home scheme. To take part, you'll need to:

• Be a first-time buyer who is buying a home in England.

• Be buying a new-build home.

• Be intending to live in the property.

• Have an income of no more than £110,000 per household outside of London, or £140,000 per household inside of London.

• Have a deposit of at least 2.5% of the property price, but no more than 15%.

• Meet the local area property price cap. (These price caps will be set out in full over the coming weeks, but for inner and outer London these caps will be £650,000 and £500,000 respectively, while they will be £375,000 in Reading, £320,000 in North Devon, £355,000 in Manchester and £220,000 in Middlesbrough.)

There is no maximum age limit for those wanting to take part in the scheme.

You'll need to use a mortgage lender that's signed-up to the scheme

Importantly, you'll need to find a property that is being built/has been built by a developer participating in the Your First Home scheme. More information about participating developers will be published before applications open.

When you apply for a mortgage, this will also need to be from a lender participating in the Your First Home scheme.

At this stage it is unclear whether participating lenders will let you access mortgage deals from their standard range or whether they'll have specific Your First Home mortgage deals. With Help to Buy, participating mortgage lenders had specific mortgage deals, which were more expensive than their standard range.

Important. Got a Lifetime ISA? This CAN be used if you buy through Your First Home.

Applications will open in February 2027

The Your First Home scheme will open to applications from February 2027, though you'll be able to pre-register your interest from December this year. More details on pre-registering will come in due course, but, importantly, pre-registering won't commit you to buying through Your First Homes.

The first equity loans are expected to be launched from April 2027.

Are there other options for first-time buyers with a small deposit?

Your First Home is by no means the only option if you're a first-time buyer who is struggling to save for a deposit. In fact, there are a range of homebuying schemes and types of mortgage deals that are tailored to first-time buyers in the UK who are struggling to get onto the housing ladder.

It's worth exploring what all the options are and seeing how each stacks up before making a decision. You can see some of these are in our How much can I borrow? guide.