Updated 30 October 2026, after the Budget · Land a House guides
Your First Home scheme: buying a new-build with a 2.5% deposit
In short: the government confirmed Your First Home at the Budget on 28 October 2026. First-time buyers in England can buy a new-build home with a deposit of at least 2.5%, plus a government equity loan of 20% of the price that is interest-free for five years. Household income must be £110,000 or less (£140,000 in London), the home must be under a local price cap, and applications are expected to open in February 2027.
The confirmed terms
| Who | First-time buyers, buying their main home in England |
| Which homes | New builds from developers that join the scheme |
| Deposit | At least 2.5% (MoneySavingExpert reports a 15% maximum) |
| Equity loan | 20% of the price |
| Interest on the loan | 0% in years 1 to 5, 1.5% in year 6, 3% from year 7 |
| Household income cap | £110,000 outside London, £140,000 in London |
| Price cap | £650,000 inner London, £500,000 outer London, set by council area elsewhere |
| Mortgage | From a lender that takes part in the scheme |
Source: GOV.UK, Your First Home. Full eligibility rules are due before applications open.
Key dates
- By the end of December 2026: pre-registration and guidance for buyers open.
- February 2027: applications are expected to open.
- April 2027: the first homes are expected to be bought through the scheme.
Pre-registering doesn't commit you to anything, so it's worth doing as soon as it opens if you think you'll qualify.
Price caps
The home has to cost no more than the cap for its area. The government has published London and a few example areas so far, with the full list due shortly:
| Area | Price cap |
|---|---|
| Inner London | £650,000 |
| Outer London | £500,000 |
| Reading | £375,000 |
| Manchester | £355,000 |
| North Devon | £320,000 |
| Middlesbrough | £220,000 |
Looking in London? Our London area guides show what homes actually sell for in 50 postcode districts, so you can see where a new build under £500,000 or £650,000 is realistic.
How the numbers work
The government's own example on a £300,000 new-build, with a 30-year repayment mortgage at 5%:
| Your deposit (2.5%) | £7,500 |
| Government equity loan (20%) | £60,000 |
| Your mortgage (77.5%) | £232,500 |
| Monthly cost | Your First Home | Standard 95% mortgage |
|---|---|---|
| Years 1 to 5 | £1,248 | £1,530 |
| Year 6 | £1,323 (£1,248 + £75 interest) | £1,530 |
| Year 7 onwards | £1,398 (£1,248 + £150 interest) | £1,530 |
Government illustration, not a mortgage quote. It leaves out fees, insurance, council tax, service charges and maintenance, and assumes you don't repay any of the equity loan. Try your own numbers in our mortgage calculator.
So you'd need half the deposit of a 95% mortgage and pay around £280 a month less at first. The gap narrows once interest starts in year six, and you still owe the government its 20% share.
How you repay the equity loan
You don't repay the £60,000 you borrowed. You repay 20% of what the home is worth at the time, based on an independent valuation, normally when you sell. You can pay some or all of it back earlier, and if you don't sell, it has to be repaid before your mortgage is paid off.
- Home now worth £320,000: you repay £64,000.
- Home now worth £280,000: you repay £56,000.
Paying interest from year six doesn't reduce what you owe; it's a separate charge. The government says minimum repayment amounts, valuation rules and fees will be published before applications open.
How it compares with Help to Buy
It works much like the old Help to Buy equity loan, which closed to new applications in 2022. That scheme also lent 20% towards a new-build (40% in London), with five interest-free years. The big differences are the smaller 2.5% deposit (Help to Buy needed 5%), the income caps, and the interest rates after year five: 1.5% then 3%. It's separate from the First Homes scheme, which sells certain new-builds at a discount.
Things to watch before you rely on it
- Which lenders and what rates. Under Help to Buy, scheme mortgages were often pricier than lenders' standard deals. Lenders haven't been named yet.
- New-builds often cost more than similar older homes nearby and can lose value in the first few years. Compare with what has actually sold on the street.
- A small deposit means little buffer. If prices fall, you could owe more than the home is worth.
- Costs rise after five years. Plan for the extra £75 to £150 a month (on a £60,000 loan), or aim to remortgage and repay part of the loan by then.
- Check the extras: service charges, ground rent and whether the home is leasehold.
What you can do now
- Check whether your area's price cap fits the homes you want, and that your household income is under the cap.
- Save the 2.5% deposit plus moving costs (solicitor, surveys, and stamp duty if the price is high enough). A Lifetime ISA can be used with the scheme.
- Pre-register when it opens by the end of December 2026, and shortlist new-build developments in the meantime.
Shortlisting new-builds with someone?
Land a House saves listings from Rightmove, Zoopla and OnTheMarket into one shared list, and checks every home's crime score, nearby schools, stations and what has sold on the street. It's free.
Get Land a House, freeSources: GOV.UK, Your First Home; Budget 2026; MoneySavingExpert. This page explains a government scheme in general terms and isn't financial advice. Speak to a qualified mortgage adviser before you decide.