Your First Home: can a government loan replace the Bank of Mum and Dad?

A new government scheme aims to help first time buyers who cannot rely on the Bank of Mum and Dad. Announced by Prime Minister Andy Burnham on 26 September 2026, Your First Home will let eligible buyers purchase a new build home with a 2.5% deposit, backed by a 20% government equity loan.

Speaking as he arrived for the Labour Party conference in Liverpool, the Prime Minister said the government would step in to help more first time buyers, "especially those who can't call on the bank of mum and dad".

For many families, helping a son or daughter onto the property ladder has become one of the defining financial conversations of the past decade. In a previous edition, we looked at how parents can protect a Bank of Mum and Dad gift. This scheme offers a different route for buyers without that support.

In this edition of Property Law Unpacked, we explain what has been announced, what is still unknown, and the legal points buyers and their families should think about before committing.

What has been announced

According to the official announcement from the Ministry of Housing, Communities and Local Government, Your First Home will:

• operate in England only
• support deposits of 2.5%, backed by a government equity loan of 20% of the purchase price
• apply only to new build homes bought from developers signed up to the scheme
• include an initial interest free period on the equity loan
• set a household income cap and local property price caps, so support is targeted at those who need it
• require participating developers to contribute towards the cost of running it

What is an equity loan? 

It is a loan from the government towards the price of your home. You pay nothing on it at first, and the amount you eventually repay is usually tied to what your home is worth, rather than what you borrowed. We explain how that works below.

The scheme will be funded by reprioritising existing government budgets, with developers paying towards running costs. Ministers hope this will give housebuilders the confidence to deliver more new homes.

The scheme will be formally confirmed at the Budget next month, when the Chancellor will set out costs and timings. Press reports indicate that pre-registration should open before the end of the year.

The model will feel familiar to anyone who remembers Help to Buy, the previous equity loan scheme, which closed to new applicants in October 2022.

How the numbers work

London is where the deposit barrier is highest. According to the latest UK House Price Index from HM Land Registry, the average first time buyer in London paid £466,851 in July 2026, almost double the England average of £245,515. On a £467,000 new build flat in London, the purchase would be funded like this, on the figures announced so far:

• Your deposit (2.5%): £11,675
• Government equity loan (20%): £93,400
• Mortgage (77.5%): £361,925

For comparison, the government's national example uses Rightmove's average starter home price of £230,000. That means a £5,750 deposit and an equity loan of up to £46,000.

Because the mortgage covers a smaller share of the price, and the equity loan is interest free at first, the government says buyers could save hundreds of pounds a month compared with a 95% mortgage.

The important point is that an equity loan is usually linked to the value of the home, not the amount borrowed. Under Help to Buy, buyers repaid the same percentage of the property's value when they sold or redeemed the loan. If Your First Home follows that model and the flat rises to £520,000, the 20% share to repay would be £104,000.

What this means in London. Stamp duty is a real cost here. First time buyers pay no stamp duty on the first £300,000 of the price, and 5% on the part between £300,000 and £500,000, so a £467,000 purchase attracts £8,350. Above £500,000 that discount disappears and normal rates apply to the whole price. The average London new build sold for around £509,000 in May 2026, which would mean a bill of around £13,000.

The local price caps will matter most in London. Help to Buy offered London buyers a larger equity loan of up to 40%, and it is not yet known whether Your First Home will make similar allowance for the capital.

What we do not know yet

Much of the detail will only be confirmed at the Budget. The key open questions are:

• the level of the household income cap, and whether it differs for London
• the local property price caps, area by area
• how long the interest free period lasts, and what fees or interest apply afterwards
• when the equity loan must be repaid, and whether partial repayments are allowed
• which developers and mortgage lenders will take part
• whether there is any age limit, which ministers have not yet confirmed

We will publish an update once the Budget sets out the full picture.

Legal points to consider before you commit

A smaller deposit makes buying possible sooner, but the legal structure is more involved than a standard purchase. Before reserving a plot, it is worth understanding the following.

• New build contracts work differently. Developers often set tight deadlines to exchange after reservation, and homes are frequently sold before they are finished. Your solicitor should check what happens if completion is delayed, what the specification promises, and how defects will be put right.
• The equity loan is secured on your home. Under previous schemes, the government loan was registered against the property in the same way as a mortgage, ranking behind your main lender. That meant consent was needed to remortgage, sell, transfer ownership or make significant changes, and the loan was repaid first on sale.
• Check the ongoing costs. Many new build homes carry service charges, and even new build houses can come with annual estate charges to maintain shared roads and green spaces. These need to be understood before you exchange.
• Plan for the end of the interest free period. Once it ends, the cost of the loan is likely to increase. Budget for that from day one, and think about how you would repay the loan in future.
• Think about your future plans. Letting the property, extending it or adding someone to the title may be restricted while the loan is in place.

Where the Bank of Mum and Dad still fits

Your First Home lowers the deposit barrier, but it does not remove the role of family support. Parents may still want to help with the 2.5% deposit, legal fees, moving costs, or a larger deposit that reduces the mortgage. Whether the scheme places limits on family contributions is one of the details we expect at the Budget.

Where family money is involved, the principles in our earlier article, We are the Bank of Mum and Dad: can we protect our gift?, still apply:

• Gift or loan. Most lenders will only accept a parental contribution as a gift, confirmed in a gifted deposit form.
• Ring fencing. A declaration of trust can record the parental contribution and set out how sale proceeds are divided if the property is sold or a relationship ends.
• Marriage. If the couple later marry, a declaration of trust no longer gives the same protection, and a prenuptial or post nuptial agreement may be needed.

With an equity loan in the mix, this matters even more. The government's share is repaid first on sale, so the remaining equity is smaller and the question of who is entitled to what becomes sharper.

Gifts to children can also have inheritance tax consequences, so parents may want to consider this alongside their wider estate planning. Our article on the rise of the living inheritance explores this in more detail.

Buying with a partner

Many first time buyers buy with a partner, and contributions are rarely equal. One person may have more savings, or a family gift may only benefit one of you. If you are not married, the law will not automatically reflect those differences.

A declaration of trust, put in place alongside your purchase, records who owns what and how the equity will be shared once the mortgage and equity loan are repaid. Our edition We're buying a home together, who actually owns what? explains how this works, and our Family team can advise on cohabitation and nuptial agreements where needed.

How Laurus can help

We regularly act for first time buyers and on new build purchases. Whether you are planning to use Your First Home, family support, or both, we can:

• review developer contracts and reservation terms before you commit
• explain how the equity loan affects your ownership and future plans
• draft a declaration of trust that reflects each person's contribution
• advise parents on gifts, loans and gifted deposit forms
• work with our Family and Legacy teams on nuptial agreements and inheritance planning

For tailored advice, contact our Residential Property team on 020 3146 6300 or enquiries@lauruslaw.co.uk.