First home scheme deposit requirements await October Budget clarity

The first home scheme deposit requirements for 2026 are now clear in outline but not in detail. The government’s Your First Home scheme would let eligible first-time buyers in England buy a new-build property with a 2.5% deposit, according to LSL Financial Services. The detail that decides who qualifies is not due until the Budget on 28 October, and that gap is where buyers may pause.

First home scheme latest news: the change in plain English

Your First Home was announced on Saturday 26 September, according to London TV. Under the scheme, an eligible buyer would put down 2.5% of the price of a new-build home. A government equity loan covering 20% of the price would sit alongside it, with an initial interest-free period, and the buyer would still need a mortgage for the rest.

Household income caps and local property price caps will apply, but LSL said the thresholds and the launch date are not due to be confirmed until the Budget. The scheme follows the closure of Help to Buy in 2023. The Financial Reporter notes that further details of the equity loan are still to be announced.

Craig Hall, director of strategic partnerships at LSL Financial Services, welcomed the plan. “The two biggest hurdles for first-time buyers are the deposit and affordability,” he said. “Help to Buy ticked both boxes and, with a 2.5% deposit, this new scheme goes further, so buyers can get on the ladder even earlier.”

Who pays more or less, and who may wait

The people who stand to gain most are buyers with a steady income but little savings. The Financial Reporter points to the latest English Housing Survey, which found the median deposit paid by recent first-time buyers was £36,500 in 2024-25. Cutting the upfront sum to 2.5% on a new-build would reduce that barrier sharply, if the buyer qualifies.

The scheme does not suit everyone. It covers new-build homes from participating developers, so buyers who want an older property are outside it. The Financial Reporter also says a buyer might find a 2.5% deposit but still be unable to borrow enough for the home they need. In that case shared ownership, where the buyer purchases a share and pays rent on the rest, may remain a better fit.

Hall said the wait for detail could itself hold the market back. “There is a risk that first-time buyers who are ready to buy now will hold off until they know how the scheme works. That would be a perfectly reasonable reaction.” His warning is a forecast of a risk, not a count of buyers who have already paused. Lenders are a further unknown, since Hall said many currently require borrowers to contribute at least 5%, although around 30 lenders supported Help to Buy before it closed.

First-time buyer mortgage deposit 2026: a worked example

The Financial Reporter gives one illustration: on a £240,000 property, a 2.5% deposit means finding £6,000. The table below extends that example, using the full 20% equity loan and comparing it with a 5% deposit, which Hall says many lenders ask for today. The equity loan and mortgage figures are our own arithmetic, not official figures, and they ignore legal fees, surveys and any interest once the interest-free period ends.

The saving on the deposit is £6,000, and the mortgage is £42,000 smaller, but the buyer owes the government £48,000 at some point. That is the trade the Financial Reporter describes: the buyer still needs a mortgage for most of the purchase and has an equity loan attached to the home. The price caps will decide whether a home at this price qualifies at all.

Government first home scheme updates: what to do now

The next steps are known. The Budget on 28 October should set the income caps, price caps and launch date. LSL then plans to examine the practical implications at its New Homes Forum on 19 November, with housebuilders, lenders and brokers taking part.

Michael Burt, sales director at developer City & Country, urged buyers not to stand still. “A scheme that reduces the upfront amount needed doesn’t mean saving should stop,” he said, pointing to legal fees and surveys. He also advised buyers to check their credit score, review monthly outgoings and work out what they could realistically afford, because “they will still need to demonstrate that they can afford a mortgage”.

Burt also suggested looking at new-build developments in preferred areas now, so that buyers can match homes to the price caps once they are published. He added that buyers should consider whether the scheme is right for them at all, as an existing home may suit their needs without it. Buyers in London should watch the caps closely: Burt warned that if they do not reflect the capital’s market, “many London properties could fall outside the eligibility criteria”.

Your questions answered

At what stage of buying a house do you pay the deposit in the UK?

The sources for this story do not say when the deposit would be paid under Your First Home. Check the timing with your solicitor and the developer before committing, and keep cash back for legal fees and surveys.

What is the government’s 40% loan scheme for buying a house?

The 40% figure comes from Help to Buy, not from the new scheme. Property Industry Eye reports that Help to Buy equity loans covered up to 20% of a home’s value, rising to up to 40% in London from 1 February 2016. The scheme ran from 1 April 2013 to 31 May 2023, and London TV says it had a national property value cap of £600,000.

Your First Home is described by LSL and the Financial Reporter as a 20% equity loan. No source confirms a 40% London level for the new scheme, so treat that as unconfirmed until the Budget.

Should I wait for the Budget before looking for a home?

Hall called waiting a “perfectly reasonable reaction”, while Burt advised starting the search and preparing now. The two views are compatible: you can save, check your credit and view developments without committing. If a suitable home is available without the scheme, Burt said buyers should weigh that option alongside their longer-term plans.