Your first home: How a 2.5% deposit could open the door to a new build home

Saving for a house deposit can feel like one of the biggest barriers to getting onto the property ladder. But a new government scheme could make buying a first home more achievable for eligible buyers, with the opportunity to purchase a new-build property using a deposit of just 2.5%.

The Your First Home scheme is designed to help first-time buyers in England who may be struggling to save a large deposit. It combines a smaller personal deposit with a government-backed equity loan, helping to reduce the amount buyers need to borrow through a mortgage.

How does the scheme work?

Under the proposed scheme, eligible buyers will be able to purchase a new-build home using three sources of funding:

• 2.5% personal deposit: The minimum amount buyers will need to contribute themselves.
• 20% government equity loan: An interest-free loan for the first five years.
• 77.5% mortgage: The remaining amount covered by a repayment mortgage from a participating lender.

For example, someone purchasing a new-build home worth £300,000 could put down a deposit of £7,500, receive a £60,000 government equity loan and take out a mortgage for the remaining £232,500.

This could significantly reduce the initial savings needed compared with purchasing through a traditional 95% mortgage.

Who could be eligible?

The scheme is aimed at first-time buyers purchasing an eligible new-build property in England. Current criteria include:

• Being a first-time buyer.
• Purchasing a new-build home from a participating developer.
• Using the property as your main residence.
• Having a household income of no more than £110,000 outside London or £140,000 within London.
• Meeting the relevant local property price cap.
• Being able to secure a mortgage with a participating lender.

Full eligibility requirements and details of participating developers and mortgage lenders are expected to be confirmed ahead of applications opening.

What happens after five years?

Although the government equity loan will be interest-free for the first five years, it is important to understand what happens afterwards.

Interest will begin at 1.5% in year six, increasing to 3% from year seven. These charges are separate from the mortgage repayments and do not reduce the amount of equity loan owed.

The loan is also linked to the property's value, meaning the amount eventually repaid could increase or decrease depending on how the home's value changes.

When will the scheme launch?

The Your First Home scheme is expected to open for applications in February 2027, with the first property sales anticipated from April 2027. Pre-registration and further guidance are expected before the end of 2026.

For buyers who have been putting off their plans because of the size of the deposit required, this could offer another route towards homeownership.

Could your first home be closer than you think?

Buying a property is a big financial commitment, and the right option will depend on your circumstances, affordability and long-term plans. However, with a smaller deposit requirement, the new scheme could provide an opportunity for more first-time buyers to explore the new-build market.

If you're considering taking your first step onto the property ladder, now could be a good time to start exploring your options and getting prepared for the opportunities ahead.