Budget 2026: England first-time buyer 2.5% deposit scheme
If you have ever looked at house prices and thought the deposit is the part that makes buying impossible, this announcement is aimed straight at that problem. In a statement published on GOV.UK on Saturday 26 September 2026, the government said a new England-only scheme called Your First Home will be confirmed at the Budget in October 2026. The pitch is simple: help more first-time buyers into home ownership by cutting the amount of cash they need at the start. Ministers are also presenting it as part of wider support for young people and families who feel locked out of the market.
According to the government, the scheme is expected to let eligible first-time buyers purchase a new-build home with a 2.5% deposit, as long as the developer is signed up to the scheme. The other major part is a 20% government-backed equity loan. **What this means:** instead of relying only on your own savings and a large mortgage from a lender, part of the home’s cost would be covered through that equity loan. This is not a scheme for every property on the market. It is aimed at new-build homes in England sold by participating developers.
The government also says the equity loan will come with an initial interest-free period. That is why ministers are saying some buyers could save hundreds of pounds each month compared with using a standard 95% mortgage. If you are still getting used to the jargon, a 95% mortgage usually means you put down 5% yourself and borrow the other 95% from a bank or building society. Under this plan, your own deposit would be smaller at 2.5%, while the state-backed equity loan would reduce the amount you need to borrow from a lender. In plain English, the scheme is trying to make both the upfront cost and the early monthly cost feel more manageable.
The government says the scheme is meant to tackle the deposit barrier for people who might not otherwise be able to buy their first home. But it is not being offered without limits. Ministers say there will be a household income cap and local property price caps, with the detail to be set out at the Budget. **What to watch next:** those caps will matter just as much as the headline promise. Income rules decide who gets through the door, and local price caps decide whether the homes in your area actually fall within the scheme. So while 2.5% deposits will grab attention, the fine print will decide who really benefits.
There is a second goal here as well. In its statement, the government says the new-build market is facing pressure from wider global economic strain and rising construction costs. So this is not only about helping buyers; it is also meant to give the new-build sector a push. That matters because housing policy often tries to solve two problems at once. One is affordability for households. The other is supply. If builders slow down, fewer homes reach the market. If more firms keep building, ministers will argue the scheme could support housing supply as well as demand.
Developers will also be expected to make a contribution when they sign up to the scheme. GOV.UK does not yet set out exactly how large that contribution will be, but it is an important detail rather than a footnote. If the cost to developers is high, some firms may be less willing to join. If it is lower, more developers may take part, but the public cost could rise. This is a useful reminder that housing support is never only about one buyer and one property. It also depends on who pays, who qualifies and whether enough homes are available in the first place.
For now, some of the biggest questions are still unanswered. We do not yet have the full costs, the final eligibility rules or the implementation timetable. The Chancellor is expected to set those out at the Budget in October 2026. **What it means for you:** if you are a first-time buyer, this is worth watching closely, but it is too early to assume you will qualify. Read the Budget detail carefully when it arrives, check the income and price caps, and make sure you understand how an equity loan works over time. This scheme could lower the first barrier for some buyers, but it will not by itself fix the wider problem of expensive homes.