Your First Home: The 2.5% Deposit Scheme, Minus theHype
Your First Home scheme? Here’s the whole story 👀
TL;DR
First-time buyers in England could buy a new build with a 2.5% deposit.
The government lends you 20% of the price, interest-free at first. Your mortgage covers the rest.
It's new builds only, from builders who sign up.
The key details (how long it's free, repayments, earnings and price limits) come at the Budget on 28 October.
The upsides: much less to save and a smaller mortgage. The downsides: it's a loan you pay back, new builds can cost more, and there's not much cushion if prices dip.
It won't suit everyone, so look at all your options before you commit.
A 2.5% deposit on your first home. You've probably seen that headline everywhere over the
last few days. And fair enough. For a lot of people, it's genuinely good news.
But headlines never tell the whole story. So here's ours: what the scheme actually is, what's
good about it, what isn't, and what nobody knows yet.
The short version
You put in 2.5%. The government lends you 20%. A mortgage covers the rest.
On a £200,000 new build:
You put in £5,000
The government lends you £40,000
Your mortgage is £155,000
The government's part is interest-free at first. How long for? We'll find out at the Budget!
That's the plan anyway. It's not officially confirmed until the Budget. If it sounds familiar, it
should. It's basically Help to Buy, back with a new name and a smaller deposit.
Who it's for
It's for first-time buyers in England buying brand-new homes, from builders who've signed up to the scheme.
There'll be limits on how much you earn and how much the home costs. We'll get those figures at the Budget on 28 October.
What nobody knows yet
This is the bit most headlines skip. Right now, we don't know:
how long the government's loan stays free (Help to Buy gave you five years)
what it costs after that
how and when you pay it back
the earnings and price limits
when it opens, or which builders are taking part
So if anyone's already telling you exactly how it works, they're guessing. We'd rather wait for the facts, and we'll update this post when they're out.
What's genuinely good
Much less to save. On a £200,000 home, you'd need £5,000 instead of £10,000. If you don't have family money to lean on, that matters. A lot.
A smaller mortgage. You're borrowing less from the lender, and borrowing a smaller share of the price usually gets you a better rate. The government says people could save hundreds of pounds a month compared with borrowing 95%.
A brand-new home. It'll usually come with a warranty, and it's usually cheaper to heat.
What's not so good
We'd be doing you a disservice if we stopped there.
New builds only. Older homes often give you more space for your money, and they're off the table. You're also limited to what's being built, and where. On the Wirral, that might not be where you want to live.
You can sometimes pay extra for "new". When Help to Buy was around, there were real concerns that builders priced the government's help into their homes. So check the price against similar homes nearby, both new and older. And remember that a home is only new once.
It's a loan, not a gift. With Help to Buy, you paid back a share of what your home was worth, not the amount you borrowed. If your home went up in value, so did the bill. Expect something similar this time, but we'll know for sure in October.
Not much of a cushion. With only 2.5% of your own money in, even a small dip in prices could leave you owing more than your home is worth. That can make moving tricky for a while.
Free isn't forever. At some point, the government's loan will start costing you. Make sure the numbers still work then, not just on day one.
What to do right now
Keep saving. Solicitors, surveys and moving all cost money on top of the deposit.
Check your credit report and fix anything that looks wrong.
Don't pay to reserve a new build on the promise that it'll qualify. Wait for the details.
Don't assume this is your best option. For some people, a 5% deposit on an older home will work out better.
Get a second opinion from someone who'll look at all your options, not just this one.
How we help
We're not here to push a scheme. We look at your situation and tell you straight what makes sense. Sometimes that's the shiny new option. Sometimes it isn't.
It's one person from start to finish. Whole of market. Plain English. No pressure.
This is general information, not personal advice. Everyone's situation is different, so the best next step is a chat about yours.
Buying your first home on the Wirral? Book a free chat, call us on 0151 440 3500 or email hello@ngmortgages.co.uk. Let's get this sorted.
Your home may be repossessed if you do not keep up repayments on your mortgage.