New Your First Home scheme to offer 2.5% deposits on new builds in England

First-time buyers in England could buy a new-build home with a deposit of just 2.5% under a government scheme announced by Prime Minister Andy Burnham.

The scheme, called Your First Home, was announced on 26 September, the eve of Labour's annual conference in Liverpool. It is the first major housing pledge of Mr Burnham's premiership and is aimed at young people who cannot rely on family money for a deposit.

How the scheme would work

Buyers would provide a deposit of 2.5% of the purchase price. The government would then lend a further 20% of the home's value through an equity loan, and the buyer would take out a mortgage for the rest.

The equity loan would be interest-free for an initial period, which the government says is meant to keep the scheme affordable.

On a £300,000 new-build home, for example, a buyer would need a £7,500 deposit, the government would lend £60,000, and a mortgage would cover the remaining £232,500.

The conditions

The scheme would only cover new-build homes sold by developers who sign up to it, so existing homes on the second-hand market would not qualify.

When the scheme was announced, the government said there would be a cap on household income and limits on property prices that vary by area, but it had not yet set the figures. It said the Chancellor would set out the full details in the Budget on 28 October.

The price limits matter a great deal in West London, where property costs more than in most of England. They will decide which new homes in boroughs such as Ealing, Hillingdon, Hounslow, Brent and Harrow qualify.

Echoes of Help to Buy

The plan closely resembles Help to Buy, the equity loan scheme that ran in England from 2013 to 2023. It also offered government loans to buyers of new-build homes, interest-free for an initial period.

In London, where prices were highest, buyers under Help to Buy could borrow up to 40% of a new home's value from the government. That meant the scheme was used widely on new developments across the capital, including in West London.

Critics of the new plan say it will encourage buyers to take on more debt, and that Help to Buy was accused of pushing up the price of new homes rather than making them more affordable. Housebuilders, on the other hand, have been calling for government help on the buyers' side to support sales.

The government says too many young people have given up hope of ever owning a home, and that the scheme will help those without savings or family support get on the property ladder.

What happens next

The details on eligibility, income caps, price limits and how long the loan stays interest-free were due to be set out by the Chancellor in the Budget on 28 October. Anyone thinking of using the scheme is advised to check the official guidance and get independent mortgage and legal advice before committing to a purchase.