New 2.5% Deposit Scheme for First Time Buyers – What We Know So Far

Getting onto the property ladder could become easier for some first time buyers following the announcement of a new government-backed home ownership scheme requiring a deposit of just 2.5%.

The new Your First Home scheme is expected to help eligible first time buyers in England purchase a new-build property with a much smaller deposit than would normally be required.

The scheme was announced by the government on 26 September 2026 and is due to be formally confirmed at the next Budget, when further details about eligibility, property price limits and the timetable for its introduction are expected.

How Will the 2.5% First Time Buyer Deposit Scheme Work?

Under the proposed Your First Home scheme, eligible first time buyers could purchase a qualifying new-build property with a deposit of just 2.5% of the purchase price.

The government is expected to provide a 20% equity loan towards the purchase, reducing the amount the buyer needs to fund through their mortgage.

The equity loan will also have an initial interest-free period, although the government has not yet announced the full terms or how long this period will last.

For example, on a £230,000 property:

* 2.5% buyer deposit = £5,750
* 20% government equity loan = £46,000
* Remaining amount = £178,250

The remaining purchase price would normally need to be funded through an appropriate mortgage, subject to the buyer meeting the lender’s affordability and eligibility requirements.

Who Will Be Eligible for the Your First Home Scheme?

The full eligibility criteria have not yet been announced.

However, the government has confirmed that the scheme will be aimed at first time buyers purchasing new-build properties in England from developers participating in the scheme.

Household income limits and local property price caps are also expected to apply so that the scheme is targeted towards buyers who may otherwise struggle to get onto the property ladder.

Developers participating in Your First Home will also be expected to contribute towards the cost of the scheme.

Further details are expected to be announced at the Budget.

Is This a 97.5% Mortgage?

No. This is an important distinction.

The Your First Home scheme is not simply a mortgage allowing somebody to borrow 97.5% of a property’s value.

Instead, the buyer would provide a 2.5% deposit and the government-backed equity loan would contribute up to 20% of the property’s value.

The buyer would then need a mortgage to fund the remaining purchase price.

As with any mortgage application, the amount somebody can borrow will depend on their individual circumstances, including their income, expenditure, credit history and the lender’s affordability criteria.

How Is This Different From a 5% Deposit Mortgage?

First time buyers do not necessarily need to wait for the new scheme if they have a small deposit.

There are already mortgages available that can allow eligible buyers to purchase a property with a 5% deposit, including products supported by the government’s permanent Mortgage Guarantee Scheme.

Your First Home is different because the proposed government equity loan could reduce both the deposit required from the buyer and the amount that needs to be borrowed through the mortgage.

Which route is more appropriate will depend on the buyer’s circumstances, the property being purchased and the mortgage products available at the time.

Will the Scheme Apply to Any Property?

No.

Based on the government’s announcement so far, Your First Home will be available for qualifying new-build properties in England purchased from developers that have signed up to participate in the scheme.

Property price limits will also apply, although these have not yet been announced.

Anyone considering using the scheme should therefore wait for the final eligibility criteria before assuming that a particular property or purchase will qualify.

When Will the 2.5% Deposit Scheme Start?

The government has announced that full details of Your First Home will be set out at the next Budget.

This is expected to include information about:

* Household income limits
* Property price caps
* Detailed eligibility requirements
* The terms of the government equity loan
* How long the initial interest-free period will last
* Participating developers
* When applications will open

The scheme has therefore been announced but is not yet available to applicants.

Do First Time Buyers Need to Wait?

Not necessarily.

There are already a number of mortgage options available for first time buyers, including mortgages requiring relatively small deposits.

If you are considering buying your first home, it can be useful to understand how much you may be able to borrow and the mortgage options currently available rather than waiting for a particular scheme to launch.

Speaking to a mortgage broker at an early stage can also help you understand your likely budget, deposit requirements and the lenders that may consider your application.

First Time Buyer Mortgage Advice from Mortgage Force

At Mortgage Force, we help first time buyers understand their mortgage options and guide them through the process of purchasing their first home.

Whether you already have a deposit saved, are receiving help from family or are interested in the new Your First Home scheme, our mortgage advisers can help you understand the options available based on your individual circumstances.

Visit our First Time Buyer Mortgages page to learn more about deposits, affordability and the mortgage process, or speak to a Mortgage Force adviser about getting started.

The Your First Home scheme has been announced by the government but its detailed rules, eligibility requirements and launch date have not yet been confirmed. This article reflects information available as of 28 September 2026 and will be updated as further details are announced.