Your First Home: equity loans return to England — 20% from the government with a 2.5% deposit. The new scheme, and every other way to buy for less

The housing story of the autumn: the state is returning to the first-time buyer market with money, not just guarantees. The scheme is called Your First Home, the announcement went up on GOV.UK on 26 September, and the final parameters come in October's Budget. Here is what is known already, what the previous version taught everyone — and what to use while the new scheme is not yet live.

What is Your First Home and how will it work?

A three-part construction: you put down a deposit from 2.5% of the price, the government adds an equity loan — a loan worth 20% of the home's value, secured against a share of it — and an ordinary mortgage covers the rest. The scheme will run only on new-builds from participating developers: housebuilders must pay a contribution to join. The equity loan starts with an interest-free period, and by the government's arithmetic the monthly payment comes out hundreds of pounds below a 95% mortgage. Two limiters will apply: a household income cap and local price caps — the exact figures, costs and launch date arrive at the Budget. First-time buyers in England will be eligible.

What did Help to Buy teach — and what do the brochures not say?

The previous version — Help to Buy: Equity Loan — ran from 2013 to 2023 and helped hundreds of thousands of families, but left three lessons worth carrying into the new scheme. First: the interest-free period ends, and after it the loan carries charges that rise with the years — do the maths over the whole horizon, not year one. Second: the state lends a share, not a sum. You repay 20% of the home's value at the point of sale: if the house has risen, so has the debt. Third: new-builds from participating developers often carry a premium over the second-hand market, and an independent valuation before buying is not paranoia but hygiene. None of this cancels the scheme's usefulness — it is simply the honest instruction manual.

Available right now: a share, a discount, or buying from the council

While Your First Home waits for the Budget, England runs three big state mechanisms. Shared Ownership — buy a 10% to 75% share of a home, pay rent on the remainder, and buy further shares over time; the home is always leasehold and service charges apply, but the deposit is calculated on your share, not the full price. First Homes — new-builds at 30-50% below market for first-time buyers with household income up to £80,000 (£90,000 in London); councils may give priority to local residents and key workers for the first three months of sales, and the discount stays with the home for every future buyer. Right to Buy — council tenants of 3+ years can buy their home at a discount starting at 35% for houses and 50% for flats, though the regional caps after the 2024 reform are modest: from £16,000 in London to £38,000 at most. There is also Rent to Buy — reduced rent to help you save a deposit.

How do you save a deposit with the state chipping in?

The Lifetime ISA is the most underrated tool of all. Open one between 18 and 40, pay in up to £4,000 a year, and the government adds 25% on top — up to £1,000 a year in real money. Ten disciplined years is up to £10,000 of state top-up on your deposit. The money can go on a first home (up to the account's price limit, currently £450,000) or stay until retirement; withdrawals for anything else are penalised, so treat it strictly as a deposit account. If a purchase is even a year away, open a LISA today: the bonus accrues on each tax year's contributions.

And if your deposit is tiny right now?

5%-deposit mortgages never went away: the government has made its guarantee scheme for such loans permanent, anchoring the availability of high-LTV mortgages, and after the lending-rule reforms some banks widened their limits for first-time buyers. A 95% mortgage costs more per month than an equity-loan scheme — which is exactly the saving Your First Home promises — but nobody is forced to wait. Developers, meanwhile, offer their own sweeteners: stamp duty paid, legal fees covered, furniture packages, reservation discounts. One rule: test every developer 'gift' against the price — the generosity is often baked into it, and the bank's valuer may price the flat below the list.

What to do right now — step by step

If buying is in your plans for the coming years: open a Lifetime ISA and make the first payment — this tax year's bonus will not come back; measure yourself against the live schemes — Shared Ownership and First Homes need no Budget; and watch October's Budget — the income and price caps of Your First Home land there, and we will break them down on publication day. Where London homes are genuinely more affordable — we ran the official numbers, and why empty homes are about to return to the market — in our housing reform explainer.