Your First Home plan offers smaller deposits for England’s first-time buyers

Your First Home, a proposed equity-loan scheme for first-time buyers in England, would allow eligible buyers to purchase a new-build home with a deposit of 2.5%, backed by a government loan worth 20% of the property price. The government announced the plan on 26 September and said its terms would be confirmed at the following month’s Budget. For people struggling to save a larger deposit, the proposal could change the amount needed upfront, but its eligibility rules and start date remain unsettled.

The government says the homes would have to be bought from developers participating in the scheme. It plans household-income and local property-price caps, with the levels to be announced at the Budget. Participating developers would also be expected to contribute towards costs. The government has yet to publish the scheme’s overall cost or implementation timetable, leaving prospective buyers without the figures needed to assess whether they could use it.

What the proposed loan would do

Under the proposal, the equity loan would cover a fifth of the purchase price, alongside the buyer’s deposit and a mortgage. The government says the loan would have an initial interest-free period and claims buyers could save hundreds of pounds a month compared with taking a 95% mortgage. Its announcement gives neither the length of that period nor the assumptions behind the savings comparison. Those missing terms matter when comparing costs over the full life of a purchase.

Ministers describe the plan as a way to help buyers whose income is steady but whose savings are insufficient for a deposit. They also want it to support the new-build market and housing supply. Those are the government’s aims: homes have not yet been sold through Your First Home, so the announcement cannot establish how many additional buyers or homes the scheme would produce.

What Help to Buy showed

The closest precedent is Help to Buy, the earlier equity-loan scheme in England. A government-commissioned evaluation by Verian, Alma Economics and Sheffield Hallam University examined its operation from 2013 to 2023. The earlier scheme provided loans of up to 20% of a new-build home’s value, or up to 40% in London from 2016. Its loans were interest-free for five years, after which interest applied; the loan had to be repaid when the home was sold. The new proposal’s loan terms have not yet been set out in equivalent detail.

Help to Buy changed during its decade of operation. Its first version, running from 2013 to 2021, was open to both first-time buyers and existing homeowners. The second, from 2021 until the scheme ended in 2023, was restricted to first-time buyers and used regional price caps. More than 387,000 properties were purchased through the scheme, including about 328,000 by first-time buyers, according to the evaluation. Its equity loans totalled £24.7bn.

The evaluators found evidence that Help to Buy increased first-time-buyer mortgage sales and housing supply, although its effects varied by area and period. In their customer survey, 46% said they would not have been able to buy a home without it. The report also found that many customers said they could have bought a different suitable home without the scheme. Those responses describe buyers’ reported alternatives; they do not show that every purchase through Help to Buy was an additional homeownership opportunity.

The evaluation estimated that Help to Buy contributed to around 15% of new dwellings recorded in England between 2013 and 2023. It described that figure as an estimate that weighs stronger evidence from areas near the England-Wales border against weaker evidence elsewhere and other possible influences. In the border-area analysis, the researchers estimated that around 15% to 30% of first-time-buyer mortgage sales were attributable to the scheme. Neither estimate is a count of individually verified additional purchases.

The same evaluation found evidence that Help to Buy likely contributed to higher prices, especially in already expensive areas where it had little effect on first-time-buyer mortgage sales. It also found that price increases could leave homes beyond the reach of other prospective buyers. These findings explain why the balance between help with a deposit, new construction and house prices will matter when assessing Your First Home. They cannot establish what the new scheme’s effects will be.

The questions still open

The Budget is expected to specify the income and local price caps, the costs and when Your First Home could begin. The government has also not stated how long its proposed interest-free period would last. Until those details are published, buyers cannot compare the complete terms with other ways of financing a home. Nor can the government’s forecast monthly savings be assessed from the figures in its announcement alone.

The Guardian has asked people in England who used the former Help to Buy scheme to describe whether it helped them purchase a home and what happened when they repaid the loan, remortgaged or sold. Its callout contains questions for readers, rather than accounts from respondents. Their experiences may add detail to the public discussion, while the published evaluation remains the evidence available here on the earlier scheme’s measured outcomes.