The UK government recently announced Your First Home, a new equity loan scheme for first-time buyers in England. The scheme launches in early 2027 as a successor to the old Help to Buy program.
Written by Yitong Guo, Senior Associate Solicitor
Background
The original Help to Buy (HTB) scheme closed to new applications in England in October 2022. The scheme was criticised for inflating house prices, benefiting developers, and that the 5% deposit was still unachievable for the majority of home buyers. The new scheme demonstrates the government’s ambitious target to meet its manifesto pledge of building 1.5 million homes nationwide by the end of the current Parliament in 2029. It also aims to counter high economic pressures and construction costs and to stimulate developers to boost housing supply.
The Scheme
In effect, the scheme provides new-build home buyers with a 20% interest-free (for 5 years) equity loan with as little as 2.5% deposit.
An example may help you to understand how it works:
- You are buying your first new-build home, and the purchase price is £400,000.
- You provide a 2.5% deposit which is £10,000;
- The government backed loan will provide 20% of the purchase price which is £80,000;
- The rest of 77.5% will be from a mortgage, which is £310,000.
The Requirements
Before applying, you should check if you tick the box for the scheme.
The points to note are that:
- You must be first-time buyer
- The property you are purchasing must be a new-build in England
- The minimum deposit is 2.5%
- The government equity loan is interest-free for 5 years
- You must have a household income of £110,000 or less outside London, or £140,000 or less within London
- Property price caps apply to areas across England, ranging from £215,000 to £650,000. ( full list link Your First Home: local authority property price caps – GOV.UK)
Our View
Comparing with the old HTB, the new scheme has clear advantage on initial cash required. On a £215,000 home, it lowers your upfront cash requirement from £10,750 to £5,375. On a £650,000 Inner London property, it drops from £32,500 to £16,250.
HTB grouped large regions under a single cap, which priced out buyers in expensive towns. The new scheme sets caps across 296 local authorities from £215,000 in areas like South Tyneside up to £500,000 in Outer London and £650,000 in Inner London, such as Westminster, Wandsworth, Kensington and Chelsea. More properties can be included.
The capped post-year-5 interest provides further security and confidence for buyers, but notably, the interest payments do not reduce the 20% loan balance, they are purely a fee for holding the loan.
Another crucial point for buyers to note is that a smaller deposit means a bigger main mortgage. Buyers still need to pass strict lender affordability and stress-test checks on the bigger loan, compared to the HTB scheme. This in effect may cap their maximum budget even if they meet the scheme’s income limit.
As the spring 2027 launch approaches, we are hopeful that the new terms will give both buyers and developers the confidence to act and provide a much-needed boost to tackling the housing shortage.
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