Your First Home scheme: what the Budget has confirmed

In our earlier article on Your First Home, we explained how the government's new scheme for first-time buyers would work and which questions only the Budget could answer. The Budget on 28 October 2026 has now answered most of them, and the government has published its first guidance on the scheme.

The scheme works as it was announced in September. You put down a deposit of at least 2.5% on a new-build home in England, the government lends you 20% of the price as an equity loan, and a repayment mortgage covers the rest. The Budget filled in who qualifies, the price limits, what the loan costs after five years, how you repay it and when you can apply.

Some rules are still to come, and applications don't open until February 2027. If you're thinking about a new build in the meantime, our conveyancing team can talk you through the purchase and give you a fixed-fee quote before you reserve.

Who can use Your First Home

The government's guidance says you'll normally need to:

• be a first-time buyer
• buy a new-build home in England from a developer that has signed up to the scheme
• buy within the price cap for the area
• live in the home as your main residence
• have a total household income of £110,000 a year or less, or £140,000 or less in London
• get your mortgage from a participating lender.

Your lender will still carry out its own affordability and credit checks. The guidance doesn't mention an age limit, and the full eligibility rules will be published before applications open.

The price caps, and what they mean locally

Each area will have its own price cap, to keep the scheme focused on modestly priced homes. The government has published a handful so far:

• inner London: £650,000
• outer London: £500,000
• Reading: £375,000
• Manchester: £355,000
• North Devon: £320,000
• Middlesbrough: £220,000.

The full list for every local authority is due shortly.

In London, the scheme follows the London Plan's definitions of inner and outer London. That puts Bexley and Bromley in outer London, with a £500,000 cap, and Greenwich and Lewisham in inner London, with a £650,000 cap. The £140,000 income cap applies across London.

Caps for Kent and East Sussex, including Medway, Tunbridge Wells and Wealden, haven't been published yet, and the income cap there is £110,000. When pre-registration opens, it will confirm the cap for the area you want to buy in.

Stamp duty above £500,000

The Budget made no changes to stamp duty. It's worked out on the full price of the home, including the part paid with the equity loan, and first-time buyer relief only applies to homes costing £500,000 or less.

In Bexley or Bromley, every home within the cap qualifies for the relief. A first-time buyer paying the full £500,000 would pay £10,000 in stamp duty.

In Greenwich or Lewisham, a home costing more than £500,000 gets no first-time buyer relief at all. On a £600,000 new build, you'd pay £20,000 in stamp duty, on top of a 2.5% deposit of £15,000.

What the equity loan costs after five years

The loan is interest-free for the first five years. In year six you pay interest at 1.5%, and from year seven the rate is 3%.

The government's own example uses a £300,000 home and a 30-year repayment mortgage at 5%:

• a standard 95% mortgage of £285,000 would cost about £1,530 a month
• the Your First Home mortgage of £232,500 would cost about £1,248 a month
• in year six, equity loan interest of £75 a month takes that to £1,323
• from year seven, interest of £150 a month takes it to £1,398.

In this example, your monthly payments stay below the 95% mortgage throughout. The interest doesn't reduce what you owe, though, so after ten years you'd still owe the government 20% of your home's value. The figures also leave out fees, insurance, council tax, maintenance and the service or estate charges that many new-build homes carry.

Under Help to Buy, interest started at 1.75% in year six and went up every April. The new guidance gives 3% from year seven and doesn't say whether it will rise after that. Details of how you'll pay the interest are due before applications open.

How you repay the loan

Repayment follows your home's value, as it did under Help to Buy. You normally repay 20% of what the home is worth at the time, based on an independent valuation, rather than the amount you borrowed. In the government's example, if a £300,000 home rises to £320,000, you'd repay £64,000. If it falls to £280,000, you'd repay £56,000.

You'd usually repay when you sell, but you can pay off some or all of the loan earlier. The government hasn't yet set out the minimum repayment, the valuation you'll need, any fees, or how repayment works when you remortgage.

Because the government shares losses as well as gains, the loan shrinks if prices fall, but your mortgage stays the same. With 2.5% of your own money in the home, a fall of just over 3% would wipe out your share. Our earlier article covers this and the other risks to weigh before you reserve.

The developer fee

Developers pay to take part. On each home sold through the scheme, they pay a fee on the final sale price: 1% on their first 100 sales in a year, 3% on sales 101 to 250, and 4% on anything above that.

Buyers don't pay the fee directly. Before you commit, compare the asking price with similar homes nearby, including resale homes outside the scheme.

When you can apply

Pre-registration opens by the end of December 2026. It doesn't commit you to anything, but it will confirm whether you're eligible and the price cap where you want to buy. The first applications open in February 2027, and the first homes are expected to be sold through the scheme from April 2027. If you need to complete before then, you won't be able to use Your First Home.

The government has set aside £4.7 billion over five years: £700 million in 2027–28 and £1 billion a year after that. It expects to help around 70,000 households. Funding is capped each year, and the government says it will work with developers to manage how it's allocated.

Lifetime ISA changes in the same Budget

The Budget also changed the rules for first-time buyers saving in a Lifetime ISA.

From 29 October 2026, if you use your Lifetime ISA towards a first home costing more than £450,000, the withdrawal charge falls from 25% to 20%. In practice, you'd give back the government bonus but no longer lose some of your own savings as well. Homes in South East London can cost more than £450,000 and still fall within the scheme's caps, so this may affect you.

From April 2029, a new First Time Buyer ISA will replace the Lifetime ISA for new savers. You'll be able to save up to £4,000 a year and get a 25% government bonus, up to £20,000 in total, towards a first home costing up to £450,000. There's no upper age limit, and existing Lifetime ISA holders can keep paying in.

The Your First Home guidance doesn't mention Lifetime ISAs. If you plan to use both, check the details with your ISA provider and your solicitor.

What we still don't know

Further guidance is due before applications open. Until then, these questions are still open:

• the price cap for each local authority, including Kent and East Sussex
• which developers and lenders are taking part
• the full eligibility rules, including how a first-time buyer is defined
• how you'll pay the equity loan interest
• minimum repayments, valuations and fees
• whether family can gift part of your deposit.

What you can do now

• Check your household income against the cap for your area.
• Pre-register when registration opens, expected by the end of December.
• Ask a mortgage broker what you could borrow at 77.5% of the price.
• Budget for stamp duty if the price is over £300,000, plus legal fees, searches, a survey, moving costs and the equity loan interest from year six.
• Before paying a reservation fee on a home you hope to buy through the scheme, check that the developer has signed up and the price is within your area's cap.
• Choose your solicitor before you reserve. Developers usually expect contracts to be exchanged within a few weeks of reservation, so it helps to have someone lined up.

Read our guide to how long conveyancing takes explains each stage.

If you're planning to buy a new build through Your First Home, our conveyancing team can check the contract, any lease and the equity loan terms before you commit, for a fixed fee agreed at the start.

You can get a conveyancing quote online, or call your nearest office to talk it through.