Educational, not advice. This article explains how the government’s Your First Home scheme works, using the guidance and Budget documents published on 28 October 2026. It is general information, not personal financial advice. Savvy Investor Guide is not authorised or regulated by the Financial Conduct Authority. Nothing here tells you whether to buy a home or use the scheme; a regulated mortgage adviser can look at your own position.
What this article covers: who can use Your First Home, the deposit, loan and price caps, what the equity loan costs after the first five years, how it is repaid, how it differs from Help to Buy, and the stamp duty and ISA rules that sit alongside it. Every figure on the scheme itself comes from GOV.UK, the Budget or the Office for Budget Responsibility.
What it does not cover: rules the government has not yet published, which include the full eligibility rules and the participating developers and lenders. Those details are expected before applications open in February 2027.
In short
- A 2.5% deposit on a new-build home in England. The government lends 20% of the price as an equity loan, and a repayment mortgage covers the remaining 77.5%.
- Interest free for five years, then 1.5% in year six and 3% from year seven. The interest is paid on top of your mortgage and does not reduce what you owe.
- Caps apply. Household income must be £110,000 or less outside London, or £140,000 or less in London. Each local area has a price cap: £650,000 in inner London, £500,000 in outer London, and lower elsewhere.
- You repay a share of the home’s value, not a fixed sum. Borrow 20% and you normally repay 20% of what the home is worth when you pay the loan back, so the amount can go up or down.
- Pre-registration by the end of December 2026, applications from February 2027 and the first sales in April 2027.
What Your First Home is
Your First Home is the government’s new equity loan scheme for first-time buyers in England buying a newly built home. It was first announced on 26 September 2026 and its details were confirmed in the Budget on 28 October, the same day the government published its guidance. Our Budget round-up for savers and investors gives it a paragraph; this one goes through how it works.
The scheme has £4.7 billion of funding over five years: £700 million in 2027-28, then £1 billion in each following year. The Budget says it will help “around 70,000 households in England” to buy and “support the delivery of an estimated 20,000 new homes”. It will be run by Homes England at first, with the National Housing Bank due to take it over in the medium term. The government still has to pass legislation for it.
Who qualifies, and the price caps
According to the government’s guidance, buyers will normally need to:
- be a first-time buyer;
- buy a new-build home in England, from a developer that has signed up to the scheme, within the local price cap;
- live in the home as their main home;
- have a total household income of £110,000 or less outside London, or £140,000 or less in London;
- be able to get a mortgage from a participating lender.
The guidance says “Full eligibility rules will be published before applications open”. It does not yet cover buying jointly, residency or nationality, so those points are still to come.
Price caps are based on median house prices in each local authority area. The government published the full list for 296 local authority areas on 3 November 2026. The caps run from £215,000 in North Lincolnshire to £650,000 in inner London. These are some of them:
| Area | Price cap |
|---|---|
| Inner London | £650,000 |
| Outer London | £500,000 |
| Reading | £375,000 |
| Manchester | £355,000 |
| North Devon | £320,000 |
| Middlesbrough | £220,000 |
How the 2.5% deposit and 20% equity loan work
The deposit must be at least 2.5% of the price. The Budget also sets a maximum deposit of 15%, so a buyer with more than that cannot use the scheme. The government lends 20% of the price, and a repayment mortgage from a participating lender covers the rest. You own the home outright from completion: in the guidance’s words, “The government will not be a joint owner or your landlord.” Lenders carry out their usual affordability and credit checks.
Here is how the split works at the government’s example price and three of the published price caps.
| Price | Deposit 2.5% | Loan 20% | Mortgage 77.5% |
|---|---|---|---|
| £300,000 | £7,500 | £60,000 | £232,500 |
| £220,000 | £5,500 | £44,000 | £170,500 |
| £355,000 | £8,875 | £71,000 | £275,125 |
| £500,000 | £12,500 | £100,000 | £387,500 |
For comparison, the guidance says a buyer of the same £300,000 home with a standard 95% mortgage “would typically need a £15,000 deposit and a £285,000 mortgage”.
Your First Home interest after five years
The equity loan is interest free for the first five years. After that, the guidance sets these rates:
| Period | Interest rate on the equity loan |
|---|---|
| Years 1 to 5 | 0% |
| Year 6 | 1.5% |
| From year 7 | 3% |
The guidance is plain about what the interest is for: “Interest payments are separate from your mortgage and do not reduce the amount of equity loan you owe.” So paying it does not pay the loan down. The guidance does not say whether the 3% rate will change over time, or how the interest will be collected; that is due “before applications open”.
The government’s illustration uses the £300,000 home, a 30-year repayment mortgage at 5%, and no repayment of the equity loan. On those terms a standard 95% mortgage would cost £1,530 a month. Under Your First Home:
| Period | Mortgage | Loan interest | Total a month |
|---|---|---|---|
| Years 1 to 5 | £1,248 | £0 | £1,248 |
| Year 6 | £1,248 | £75 | £1,323 |
| From year 7 | £1,248 | £150 | £1,398 |
In that example the interest works out at 1.5% and then 3% a year of the £60,000 originally borrowed. On the same basis, a buyer at the Manchester cap with a £71,000 loan would pay about £89 a month in year six and £178 a month from year seven, again without reducing the loan. The illustration also assumes the same 5% rate for both mortgages; real rates depend on the lender and the product.
Repaying the equity loan
The loan is a share of the home’s value, not a fixed sum. The guidance explains: “If the loan was worth 20% of the purchase price when you bought your home, you will normally repay 20% of the home’s value when you repay the loan, based on an independent valuation.” Its own examples use the £300,000 home and the £60,000 loan:
- if the home is later valued at £320,000, you repay £64,000;
- if it is later valued at £280,000, you repay £56,000.
So the government shares in both rises and falls in the home’s value. The loan is normally repaid when you sell, and you will be able to repay some or all of it earlier. The minimum early repayment, the valuation rules, any fees and how the loan is treated on a remortgage are all due before applications open. The guidance does not yet give a final date by which the loan must be repaid.
Your First Home vs Help to Buy
Help to Buy: Equity Loan, the previous scheme, also gave buyers an equity loan with no interest for the first five years. It is closed: GOV.UK says “You can no longer apply for a Help to Buy: Equity Loan for properties in England.” The clearest published difference is the cost after year five. Help to Buy’s rate rises every year, while Your First Home’s is set at 3% from year seven, with no published rule for changing it. Your First Home also has income caps and a 15% maximum deposit.
| Your First Home | Help to Buy: Equity Loan | |
|---|---|---|
| Interest in year 6 | 1.5% | 1.75% |
| Interest after year 6 | 3% from year 7 | Rises every April by CPI inflation plus 2% (RPI plus 1% for 2013 to 2021 loans) |
| Interest worked out on | Not yet published | The amount originally borrowed |
| Smallest part repayment | Not yet published | 10% of the home’s market value |
Stamp duty and ISAs
Stamp duty. In England, first-time buyers pay no stamp duty land tax on the first £300,000 of the price and 5% on the part from £300,001 to £500,000. A home above £500,000 gets no first-time buyer relief at all, which matters in inner London, where the scheme’s cap is £650,000. At the Manchester cap of £355,000, first-time buyer stamp duty would be £2,750 (5% of £55,000); at the outer London cap of £500,000, it would be £10,000.
Lifetime ISA. A Lifetime ISA can be used towards a first home costing £450,000 or less. From 29 October 2026, the Budget lets savers use it for a home above that cap with a reduced withdrawal charge of 20%, down from 25%. The Your First Home guidance does not mention the Lifetime ISA.
First Time Buyer ISA. From April 2029 a new First Time Buyer ISA replaces the Lifetime ISA for new savers, with the same £4,000 a year limit and 25% government bonus, for homes up to £450,000 and with no upper age limit. Our guide to the First Time Buyer ISA covers it in detail.
Timeline
- By the end of December 2026: pre-registration for buyers opens, along with guidance and the first developer registrations. Pre-registering does not commit you to buying through the scheme.
- 3 November 2026: the full list of price caps by local authority area was published.
- Before February 2027: full eligibility rules and details of participating developers and lenders are due.
- February 2027: first applications.
- April 2027: first sales under the scheme.
What others have said
The Office for Budget Responsibility expects only a small effect on the market. It says the scheme “could marginally raise house prices by stimulating housing demand”, and it expects the scheme “to only have a marginal impact on housing supply given its limited overall size”.
The Resolution Foundation found that “three-quarters (76 per cent) of the private renter households with the resources to access Your First Home are in the top half of the income spectrum”. The Home Builders Federation said “We welcome the Your First Home scheme” and that it would “await full details on house price caps and the other scheme parameters”.
Developers pay to take part, through a fee on each sale: 1% on their first 100 homes sold through the scheme, 3% on homes 101 to 250, and 4% after that. For the wider market, see our October look at UK house prices and our record of September’s mortgage rate rises.
Frequently asked questions
Can I use Your First Home to buy an older home?
No. The scheme is for new-build homes in England from developers that have signed a participation agreement. The list of participating developers is due before the scheme launches.
Do I pay anything on the equity loan in the first five years?
No interest is charged in years one to five. You still pay your mortgage as normal. The guidance has not yet said whether there will be other fees, such as a management fee or a fee for repaying the loan; those details are due before applications open.
What happens if my home goes down in value?
You normally repay the same percentage of the home’s value that you borrowed, so if the home is worth less when you repay, the amount you repay is lower. In the government’s example, a 20% loan on a £300,000 home that is later valued at £280,000 means repaying £56,000 rather than £60,000.
Does pre-registering commit me to anything?
No. The guidance says pre-registration, which opens by the end of December 2026, does not commit you to buying through the scheme.
Is the scheme available in Scotland, Wales or Northern Ireland?
No. Your First Home covers England only. Housing support is devolved, so the governments in Scotland, Wales and Northern Ireland run their own schemes.
Sources
- GOV.UK, “Your First Home”, 28 October 2026
- HM Treasury, “Budget 2026”, 28 October 2026
- GOV.UK, “New first-time buyer scheme to be confirmed at Budget”, 26 September 2026
- Office for Budget Responsibility, “October 2026 Economic and fiscal outlook”
- GOV.UK, “Help to Buy: Equity Loan”
- HMRC, “Stamp Duty Land Tax: relief for land or property transactions”
- GOV.UK, “Lifetime ISA”
- Resolution Foundation, “Spread thin: Analysing the Autumn 2026 Budget”, October 2026
- Home Builders Federation, response to the Autumn Budget 2026, 28 October 2026
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