The proposed ‘Your First Home’ scheme would combine this smaller upfront deposit with a government-backed loan worth 20% of the property’s value.
It's aimed at people who can afford the ongoing cost of home ownership but have struggled to save for a deposit, particularly those without financial help from family.
How would Your First Home work?
Under the outline announced so far, an eligible first-time buyer would provide a 2.5% deposit and take out a conventional mortgage alongside an equity loan of up to 20% of the home’s value.
The loan would be interest-free for an initial period, although its length and the charges that would apply afterwards are yet to be confirmed.
The scheme would apply to new-build properties bought from participating developers.
The government has not yet confirmed whether the scheme will include income limits, property price caps or age restrictions. Further details are expected in next month's Budget.
What could it look like in practice?
On a £230,000 home, a 2.5% deposit would be £5,750 and a 20% equity loan would be worth £46,000.
The lower deposit could shorten the time some people need to save. However, buyers would still need to budget for legal fees, mortgage costs, a survey, moving expenses and the longer-term cost of the equity loan.
How is it different from Help to Buy?
The broad structure is similar to Help to Buy which was introduced in 2013 and came to an official end in 2023. Help to Buy also used a government equity loan to reduce the deposit and mortgage buyers needed.
Its later version was limited to first-time buyers and applied regional property price caps.
A 2.5% deposit would also be lower than the 5% generally required under Help to Buy, but the full eligibility and repayment rules have not yet been published.
As with any equity loan, buyers will need to understand how the amount they repay is calculated.
If the loan represents a percentage of the property rather than a fixed sum, the amount owed could rise or fall with the value of the home.
The government has not yet confirmed whether the new scheme will follow the same model as Help to Buy.
What details are still to come?
The announcement gives first-time buyers an early outline rather than a complete set of rules. Further information is expected at the next Budget, including:
when applications will open
the length of the interest-free period
interest rates or fees after that period
household income limits and local property price caps
how and when the equity loan must be repaid
whether an age restriction will apply
which developers and new-build homes will take part
Until these points are clear, buyers should be cautious about basing a purchase decision on the headline deposit figure alone.
Government also outlines action on empty homes
Alongside Your First Home, ministers have announced plans to strengthen the powers available to councils to bring empty properties back into use.
The aim is to make it easier for local authorities to use some of England’s vacant homes to meet local housing need.
Further details will be needed to show which properties could be affected, how quickly councils could act and how the costs of taking over, and managing a home would be handled.
