Your First Home Scheme: 2.5% Deposit Equity Loan in London

The Your First Home scheme is an official UK government-backed equity loan initiative designed to help first-time buyers purchase new build properties with a 2.5% deposit. By pairing a 20% interest-free government equity loan with a 77.5% commercial mortgage, the programme lowers upfront capital hurdles across London developments such as High Street Quarter and Ridgeway Views.

Announced ahead of the upcoming Autumn Budget by the Ministry of Housing, Communities and Local Government (MHCLG), the initiative provides a direct state-backed successor to the previous Help to Buy programme. It targets the primary challenge confronting renters: saving a large cash deposit while managing high living costs.

Official UK Government Announcement

The government formally confirmed the name of the programme on 26 September 2026. This announcement represents confirmed government policy rather than media speculation or an interim proposal.

The official GOV.UK release, entitled "New first-time buyer scheme to be confirmed at Budget", clarifies the policy framework:

"The new scheme called Your First Home will support first-time buyers."

"The government has today announced a new equity loan scheme - Your First Home - in England..."

Full statutory guidance, regional price caps, and opening application dates will be confirmed by the Chancellor at the Autumn Budget on 28 October 2026. Pre-registration systems are scheduled to go live before the end of 2026.

How the Your First Home Scheme Works

The financial structure splits the property purchase price into three distinct parts: a minimal buyer deposit, an equity contribution from the government, and a standard repayment mortgage.

Because the government provides a 20% equity loan, buyers only need to secure a 77.5% loan-to-value (LTV) mortgage rather than a standard 95% mortgage. Mainstream mortgage lenders offer significantly cheaper interest rates for sub-80% LTV borrowing, saving buyers hundreds of pounds on monthly repayments.

Indicative Monthly Savings for London Buyers

Here is an illustration of how the 2.5% deposit and 20% equity loan model functions across typical price brackets for new properties in Greater London:

Note: Monthly savings represent indicative estimates based on current mortgage spreads between 75%-80% LTV products and 95% LTV products over a standard 25-year repayment term. Exact savings depend on final commercial lender terms published following the Budget.

Core Features of the Equity Loan

The 20% state equity loan includes an initial interest-free window during your first years of ownership. During this introductory term, you pay no interest on the equity proportion, paying only a nominal monthly account management charge (typically £1 per month).

Because the government holds an equity percentage rather than a fixed debt, the redemption figure adjusts with future market movements. When you sell the property or choose to pay off the loan, you repay 20% of the market valuation at that specific time.

Participating housebuilders co-fund the initiative by paying an upfront fee when registering eligible developments. This joint mechanism supports new housing delivery while keeping taxpayers' commitments sustainable.

Eligibility Criteria: What Has Been Confirmed

The government has confirmed the core eligibility standards, while detailed caps will be revealed in the Budget:

• First-Time Buyers Only: All named applicants on the mortgage and title deeds must have never previously owned residential property in the UK or abroad.
• New Build Properties Only: The scheme applies exclusively to brand-new homes purchased directly from approved developers.
• Sole Residence Requirement: The home must serve as your only private residence. Buy-to-let investments and second homes are strictly prohibited.
• Household Income Caps: The scheme will apply regional income limits to ensure state support reaches households with genuine affordability constraints.
• Regional Property Price Caps: Maximum purchase limits will vary by region, with higher caps planned for London and the South East to reflect capital pricing.

Comparing Your First Home Against Other Schemes

Buyers in London have multiple pathways to evaluate when choosing an affordable route into homeownership:

Why 2.5% Deposits Change the London Market

In Greater London, where first-time buyer property prices often exceed £400,000, saving a traditional 10% deposit (£40,000) or even a 5% deposit (£20,000) can take years while paying London rents. A 2.5% deposit lowers that hurdle to £10,000 on a £400,000 property.

This policy change will open up access across London regeneration zones. You can explore modern flats in London and upcoming off-plan properties in high-connectivity transport corridors.

Browse active developments across the capital via our London new builds directory, or inspect current projects from leading UK property developers.

Essential Financial Planning Considerations

While a 2.5% deposit brings homeownership within closer reach, you should maintain additional capital reserves for setup expenses:

• Conveyancing and Surveys: Set aside £2,000 to £3,500 for legal representation and required property searches.
• Mortgage Booking Costs: Lenders often charge between £0 and £1,000 for mortgage arrangement products.
• Service Charges: New build apartment developments include ongoing charges for communal upkeep and building management.
• Mortgage Modelling: Use our mortgage payment calculator to estimate total monthly outlays before committing.

4 Steps to Prepare for Launch

1. Build Your 2.5% Fund: Save your target 2.5% deposit plus a cash buffer of £4,000 to £5,000 for legal and move-in costs.
2. Check Your Credit Rating: Request your credit file from major reference agencies to ensure clean eligibility for the 77.5% commercial mortgage.
3. Follow the Budget Announcement: Watch for the Chancellor's speech on 28 October 2026 for confirmed London price caps and household income ceilings.
4. Shortlist Developments: Identify eligible new build projects in target neighbourhoods and register for developer alerts early.