Your First Home scheme explained: who could benefit and what’s the catch?

The Government’s new Your First Home scheme has already attracted plenty of opinions.

For some, it is a welcome helping hand for first-time buyers. For others, it looks like another version of Help to Buy that could push prices up and benefit developers.

My view? It could help certain buyers. But a smaller deposit and a cheaper initial monthly payment are only part of the story.

We need to understand the longer-term costs, what happened under the previous scheme and whether the property itself represents a sensible purchase.

Information checked on 30 September 2026. The scheme’s full terms, eligibility rules and mortgage products are still to be confirmed.

What is the Your First Home scheme?

The Government has announced plans for an equity loan scheme aimed at first-time buyers purchasing eligible new-build homes in England.

The proposed structure involves a deposit of 2.5%, a government-backed equity loan of 20% and a mortgage covering the remaining 77.5%.

There would be an initial interest-free period on the equity loan. Household income limits and local property price caps are also planned.

Further details, including costs and implementation timings, are due at the October Budget. At this stage, buyers should not assume the scheme is available or that they will qualify.

Why is it aimed at new builds?

There are two big reasons: getting more homes built and getting money moving through the economy.

Labour has committed to delivering 1.5 million homes in England during this Parliament. But a target alone does not get bricks laid.

Developers need buyers who can afford the homes they build. Higher mortgage rates squeeze buyers’ budgets, while rising construction costs put pressure on developers.

If homes are taking longer to sell, developers have less incentive to push ahead with the next phase of a development. Making those homes easier to buy could support sales and give builders more confidence to start the next ones.

Then there is the wider economic benefit.

Think about how many businesses are involved before someone gets their keys.

Factories producing bricks, windows and plasterboard. Suppliers delivering materials. Bricklayers, electricians, plumbers and carpenters building the homes. Mortgage advisers, lenders, surveyors and solicitors dealing with the purchase.

The spending continues after moving day too.

People buy sofas, beds, curtains and appliances. They pay for flooring, decorating and landscaping. That supports retailers, delivery drivers and local businesses, whose earnings then circulate through the wider economy.

From the Government’s perspective, that is the potential double benefit: progress towards its housing target and more economic activity.

The real test is how much additional building the scheme encourages. Funding purchases that would have happened anyway delivers less benefit. If demand increases faster than supply, some of the support could also feed into higher prices.

What can we learn from the old Help to Buy scheme?

Help to Buy’s results were mixed. Will Your First Home be the same?

It helped people become homeowners and supported additional housebuilding. But evidence also suggests it pushed up prices.

The experience was not the same everywhere. Research found that in Greater London, where increasing housing supply is particularly difficult, Help to Buy increased prices without a measurable increase in construction. In some areas where building was easier, the response included more homes being built.

For individual buyers, the outcome depended on what they bought, where they bought it and the price they paid.

Some got a home that suited them and a useful start on the property ladder. Others, including some buyers of new-build flats in London, have faced falling values and struggled to move on.

Rising service charges and building safety issues have added to the difficulties for some flat owners. It would be too simplistic to blame all of those problems on Help to Buy itself.

But the lesson matters. A government scheme can help you afford a purchase without protecting you from paying too much or buying a property that becomes difficult to sell.

If your home falls in value, selling could leave you with too little equity for your next deposit, or even a shortfall against the borrowing secured on it. That can leave you stuck when your job, relationship or family circumstances change.

What could the new scheme look like in pounds and pence?

Let’s say you want to buy a £300,000 home and have £7,500 available for the deposit, with buying costs covered separately.

There are already options for buyers with smaller deposits. Accord and Halifax, for example, offer £5,000 deposit mortgages, subject to eligibility and property restrictions.

Accord’s product excludes new builds, so we are comparing different routes into homeownership rather than necessarily two options for the same property.

Using the rates below, here is how the mortgage payments could compare:

These calculations use illustrative rates and repayment mortgages, with no fees added to the loan. They are not mortgage offers. The scheme comparison assumes the equity loan remains interest-free throughout the first five years, which has not yet been confirmed. Buying costs and any scheme fees are excluded.

We do not yet know what rates participating lenders will offer on the Your First Home scheme.

A mortgage covering 77.5% of the property’s value could attract a lower rate than one covering 97.5%. However, scheme mortgages might carry a premium compared with an ordinary mortgage at the same loan to value.

The 5.29% rate above is an illustration, not an announced Your First Home product.

I would expect interest from lenders familiar with the old Help to Buy scheme, but participation and pricing still need to be confirmed.

Around £449 less going out each month

In this example, the equity loan route would reduce the monthly mortgage payment by approximately £449.

Over five years, that is around £26,946 less paid towards the mortgage.

For someone paying rent while trying to save, or a family juggling childcare bills, that could make a substantial difference.

But it is a cash-flow benefit rather than proof that the scheme is £26,946 cheaper overall. You would still have the equity loan to deal with.

Here is how the mortgage payments break down:

Figures are rounded independently.

Most of the payment difference in this example is lower mortgage interest: approximately £25,733. Around £1,212 comes from repaying less mortgage capital.

That is a meaningful initial benefit. However, the overall comparison must also account for the equity loan repayment, fees and any later charges.

The equity loan is still borrowing

The £60,000 is not a gift.

With an equity loan, repayment is linked to the value of the property. You should not assume that borrowing £60,000 means you will only ever repay £60,000.

To illustrate, if repayment is based on 20% of the property’s future value, these would be the figures after five years:

Figures assume compound annual growth and are rounded to the nearest pound. These are illustrations, not forecasts. The new scheme’s detailed repayment and valuation rules remain to be confirmed.

At 3% annual growth, the equity loan repayment would increase by approximately £9,556.

Your home would also have increased in value, but you would need to account for the Government’s share when selling or raising money to repay the loan.

Prices could also stay broadly similar or fall. If the property fell by 10% overall to £270,000, a straight 20% calculation would produce a £54,000 repayment. The final scheme rules would determine how losses are treated.

A lower repayment would not make falling prices good news. Your own equity could also shrink, making your next purchase or remortgage harder.

Nobody knows what your home will be worth in five years. That is why a repayment plan should not depend entirely on prices rising.

What happens after five years?

Five years is a useful review point because the illustrative fixed mortgage deal would be ending. It is not a confirmed repayment deadline for the new equity loan, nor is it a confirmed end date for its interest-free period.

Depending on the final rules, the possible routes could include:

Selling and moving

You might have outgrown the property or need to move for work. On sale, the mortgage and equity loan would need to be settled, with anything left after costs available towards your next purchase.

Whether that leaves enough for the next deposit depends on the sale price and the outstanding borrowing.

Staying and repaying the equity loan

You could potentially use savings, additional mortgage borrowing or a combination of both.

Being able to borrow more would depend on your income, outgoings, property value and the lender’s criteria at that time. It cannot be assumed just because you qualified for the original mortgage.

Keeping the equity loan

If the scheme rules allow, you could retain it and budget for interest and any fees once the interest-free period ends.

The details of those charges are still to be confirmed. Paying interest would not itself reduce the equity loan balance.

Who do I think could benefit most?

Two situations stand out to me on who may benefit from Your First Home, subject to the final eligibility rules.

Young professionals early in their careers

Someone starting in a profession with a clear route to higher earnings could find the lower initial payment particularly useful.

They might be able to afford the home now, then use stronger earnings later to support a remortgage that repays the equity loan.

That is more convincing where there is a credible career path behind the plan. “Hopefully I’ll earn more” is a much weaker starting point.

Even with good career prospects, future borrowing is not guaranteed. The purchase needs to remain manageable if promotions or pay rises take longer than expected.

Young families facing expensive childcare years

One parent might be working reduced hours, or both might be working while paying substantial nursery bills.

In that situation, approximately £449 a month could provide valuable breathing room.

As the children get older, childcare costs may reduce or a parent may increase their working hours. That could leave the household better placed to repay the equity loan.

The scheme could therefore help during a period when money is particularly stretched, provided there is a realistic longer-term plan.

Do your homework on the property

A smaller deposit should not distract you from whether the home is worth the asking price.

Before committing:

• Compare actual sold prices. Look at similar homes nearby, including properties being resold on the same development.
• Check the new-build premium. Are you paying significantly more because everything is brand new? Your eventual buyer will be purchasing a second-hand home.
• Understand the ongoing costs. For flats, check the lease, service charges, planned major works and any building safety concerns. Houses can have estate management charges too.
• Think about your next move. Would the property still work if you had children or needed to work from home? Could you stay longer if selling became difficult?
• Understand the equity loan. Check when charges begin, how repayment is calculated and what happens if your circumstances change.

Getting access to a scheme does not automatically make a property good value.

Could the wider housing market still struggle?

One concern about the Your First Home Scheme is what happens if the scheme draws buyers towards new builds while demand for existing starter homes remains weak.

First-time buyers often allow an existing homeowner to make their next move. That seller then buys from someone else, helping a chain progress.

If more buyers choose new builds instead, some owners of existing starter homes could find it harder to sell. That could slow movement further up the property ladder.

It is a possible consequence rather than a certainty. Some scheme users may be people who otherwise could not buy at all, so their purchase would add demand rather than divert it.

Still, stronger new-build sales would not automatically mean the whole housing market was recovering. The Government could support construction while parts of the second-hand market continued to limp along.

Our view at Dimora Mortgages

Is Your First Home scheme perfect? No.

It does not fix the underlying gap between earnings and house prices. It also brings a separate financial commitment that buyers need to understand.

But dismissing it outright overlooks the people it could help.

For a buyer with limited savings, a realistic budget and a credible plan for the equity loan, it could make homeownership possible sooner and the early years more manageable.

The decision needs to take account of the property, the monthly payments and the longer-term cost.

As the full details emerge, that is what we will be looking at with our clients.

We would also recommend getting independent advice prior to proceeding with any scheme to ensure you understand what you are signing up to. Our team at Dimora Mortgages are on hand to assist.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Sources and further reading

• Government announcement: Your First Home scheme
• Government housing target: 1.5 million homes
• Independent evaluation of the Help to Buy scheme
• LSE research on Help to Buy, prices and construction
• Financial Times: falling flat prices and the London market
• Accord £5,000 deposit mortgage
• Halifax £5,000 deposit mortgage