For many aspiring homeowners, saving for a deposit remains one of the biggest barriers to getting onto the property ladder. Prime Minister Andy Burnham announced plans on September 26th to tackle that challenge by introducing a scheme that could allow eligible first-time buyers to purchase a new-build home with a deposit of just 2.5%.
But how would the plan work, who could benefit, and what should buyers keep in mind before the full plan is announced as part of the Autumn Budget in October?
The proposed scheme is designed to help first-time buyers in England (Scotland and Wales already have schemes in place) who have a steady income but are struggling to save a large deposit. Under the proposal, eligible buyers would be able to purchase a qualifying new-build property with a minimum deposit of just 2.5%, supported by a government-backed equity loan worth 20% of the home’s value.
To further support those taking part in the scheme, people will be able to access equity loans with a set interest-free period, helping to keep monthly costs lower for a certain amount of time.
While full details are expected to be confirmed by John Healey in the Autumn Budget next month, the outline of the scheme includes:
For example, if a first-time buyer was considering a new build home valued at £230,000, they costs would be broken down into:
House prices and rental costs have made it increasingly difficult for many people to save sufficient deposits while also covering everyday living expenses.
The Prime Minister says the scheme is intended to support people who can afford monthly mortgage repayments but struggle to accumulate the upfront savings typically required by lenders. The proposal also seeks to encourage housebuilding by boosting demand for new-build properties.
Many property professionals will notice similarities with the former Help to Buy scheme, which supported hundreds of thousands of buyers before closing to new applicants in 2022. Like Help to Buy, the new proposal relies on government equity loans to reduce the size of the mortgage required.
However, the government says the new scheme will include tighter eligibility criteria, including household income limits and local property price caps, to better target support towards those who genuinely need assistance.
Lower deposit requirements. The most obvious advantage is the significantly reduced deposit requirement. For many renters, saving 2.5% may feel far more achievable than saving 10% or even 5%, and will allow them to get onto the property ladder much quicker.
Potential access to better mortgage rates. Because the government equity loan would cover part of the purchase price, buyers could require a smaller mortgage relative to the property’s value. Industry experts suggest this could provide access to lower mortgage rates than typically available on high loan-to-value products.
Support for first-time buyers. The scheme specifically targets first-time buyers, and particularly those without family financial support, helping to widen access to homeownership and help those most in need.
While the proposal could make buying a home more accessible, there are important considerations:
As with any government-backed homeownership scheme, buyers should carefully review the long-term costs and seek professional financial advice before proceeding.
Andy Burnham’s proposed Your First Home scheme could become one of the most significant housing market interventions in recent years, reducing the deposit hurdle for first-time buyers and potentially helping more households access homeownership. With a 2.5% deposit requirement and a 20% government equity loan, the scheme aims to support those who can manage monthly repayments but have struggled to save a traditional deposit.
However, key details, including eligibility rules, price caps and implementation timelines, are still to be confirmed. For prospective buyers, the coming Budget announcements will be essential reading.
Disclaimer: This article is provided for general information only and should not be relied upon as financial or mortgage advice. Mortgage products, government schemes and eligibility criteria can change. Buyers should seek independent financial and mortgage advice before making any property purchase decisions.
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