The UK government is preparing a new mortgage support scheme that could allow first-time buyers in England to purchase newly built homes with deposits as low as 2.5%. But proposed household income limits could determine who gets access.
New Income Limits Could Exclude Some First-Time Buyers
Under the proposed Your First Home scheme, households earning £110,000 or more annually would be excluded from support outside London. In the capital, the threshold would rise to £140,000.
The limits are expected to be confirmed in the government’s upcoming Budget, according to the BBC.
Ministers reportedly considered lower thresholds of £90,000 outside London and £110,000 within the capital. They later reconsidered amid concerns that those figures would exclude too many middle-income couples, including households with teachers and nurses.
The revised thresholds reflect an attempt to target financial assistance toward buyers who struggle to enter the property market without extending the program to the highest-earning households.
How the 2.5% Deposit Scheme Would Work
The proposal centers on government-backed equity loans covering 20% of a property’s purchase price.
Eligible first-time buyers would use these loans to purchase newly constructed homes from participating developers across England.
The loans would carry an initial interest-free period, although the government has not yet detailed its duration or the subsequent interest charges.
For a property costing £300,000, a 2.5% deposit would amount to just £7,500. A 20% equity loan would represent £60,000, leaving £232,500 to be financed through a mortgage or other funds.
This illustration assumes the full equity loan is available and does not include transaction costs or lender affordability requirements.
Unlike a conventional fixed loan, an equity loan is linked to the property’s value. The amount eventually repaid can therefore increase or decrease as house prices change.
Why the Government Is Reviving Equity Loans
Prime Minister Andy Burnham announced the initiative at Labour’s annual conference, promising to prioritize buyers who “really need support.”
The announcement comes as ministers acknowledge they are on course to miss their target of building 1.5 million homes in England before the next general election.
The government hopes the scheme will support demand for newly built properties and encourage developers to construct more homes.
Labour says the program will operate within existing government budgets, although ministers have not identified which spending areas would be reduced to fund it.
Participating developers would also contribute toward administrative costs.
Developers Welcome the Plan as Conservatives Raise Concerns
The Home Builders Federation, which represents residential developers, has welcomed the initiative and urged ministers to implement it quickly.
The Conservative Party has taken a different position, calling the proposal a “colossal admission of failure” over Labour’s housebuilding record.
Conservatives also warn that requiring developers to contribute to the program’s costs could increase prices for newly constructed homes.
The disagreement echoes criticism of earlier government-backed purchasing programs, which faced accusations of inflating property prices by increasing buyers’ purchasing power.
How It Compares With the Previous Help to Buy Scheme
The new initiative resembles the Help to Buy equity loan scheme, introduced under the Conservative–Liberal Democrat coalition in 2013.
Its original version allowed purchasers to buy qualifying new-build homes worth up to £600,000 with a 5% deposit and an equity loan covering up to 20% of the property’s value.
Those loans were interest-free for the first five years.
A revised version, operating between 2021 and 2023, restricted eligibility to first-time buyers and introduced regional property price caps.
Unlike the proposed Your First Home program, neither version imposed household income limits.
The previous Help to Buy scheme ended in 2023, leaving the proposed initiative as a potential successor to a major government-backed route into homeownership.
