Andy Burnham has proposed a new 2.5% deposit scheme called ‘Your First Home’ for first-time buyers in England, in the hopes of addressing the issue that one in three (28.7%) 20- 34-year-olds now live at home with their parents, unable to afford their first mortgage.
However, mortgage expert Joseph Lane, Founder of Mortgage Lane, warns first-time buyers that the scheme might not be as good as it seems.
‘Your First Home’ at 2.5% deposit, but what’s the catch?
The Government’s proposed ‘Your First Home’ scheme would allow eligible first-time buyers in England to buy a participating new build property with a 2.5% deposit and a 20% government equity loan. The remaining 77.5% would be funded through a mortgage, as normal, with the equity loan initially interest-free. Further details will be announced at the October Budget.
What is an equity loan?
“This is the bit prospective buyers need to understand. The government won’t simply be lending you 20% of the purchase price to repay later as a fixed amount. It takes an equity stake equivalent to 20% of the property’s value.”
Joseph Lane provides an example on a £250,000 home:
Deposit: £6,250
Mortgage: £193,750
Government equity loan: £50,000
“If that property rises in value to £300,000, the government’s 20% share becomes £60,000. Buyers therefore repay £10,000 more than they originally borrowed.
“The reverse is also true: if the property falls in value, the equity repayment falls too. This is a fundamentally different arrangement from a conventional fixed loan, the basis on which the previous ‘Help to Buy’ scheme operated.
“And though the initial interest-free period sounds attractive, we don’t yet know the full interest and equity structure for ‘Your First Home’. Under ‘Help to Buy’, interest began after five years and the equity loan ultimately had to be repaid against the property’s then-current value.”
Why only new build homes?
“Buyers aren’t simply being given a 2.5% route into the housing market; they’re being given a 2.5% route into new build housing.
“That caveat matters because new builds are already significantly more expensive on average, meaning a 2.5% deposit could still take a while to save for. In September 2025, the average new-build home sold for £355,000, compared with £290,000 for an existing property, a difference of around £65,000. New builds also accounted for just 5.6% of all property sales in England.
“Location of new build properties could be another pain point for potential buyers. The Government’s current housebuilding strategy is increasingly focused on large-scale developments and ‘new towns’, including sites around Manchester, Leeds, Bristol, Milton Keynes and Bedfordshire, with the intention of building homes alongside jobs and transport infrastructure.
“That is obviously encouraging in the long term, but a cheap deposit doesn’t help much if the available home isn’t where the buyer needs to live for work, family or transport. Propertymark has also warned that large developments need to form part of a broader strategy, including smaller developments and expansion of existing towns and cities.”
Who actually qualifies?
“This is still a major unknown. We know the scheme is intended for first-time buyers in England, buying a new-build from a participating developer, but the Government has confirmed that household income limits, local property price caps and further eligibility details will come at the Budget,” concludes Joseph.