The 2 new schemes designed to support first-time buyers explained

In the October 2026 Budget, the government unveiled details of two new initiatives that aim to support first-time buyers.

One of the first challenges many first-time buyers face is saving a deposit. Rising rents and property prices mean it’s become increasingly difficult to save the required sum. According to Moneyfacts (22 September 2026), more than 40% of first-time buyers believe it will take them more than five years to save a house deposit.

Both incoming government schemes could provide support when you’re facing this challenge.

Please keep in mind that legislation is subject to change.

1. First Time Buyer ISA

The Lifetime ISA (LISA) was introduced in 2017 to help people save for their first home or for retirement. The new First Time Buyer ISA will be similar in many ways but is designed specifically for first-time buyers, and is expected to launch in April 2029.

During each tax year, you can typically pay up to £20,000 into ISAs. ISAs provide a tax-efficient way to save or invest, as interest or investment returns usually aren’t liable for Income Tax or Capital Gains Tax.

However, the amount you can pay into a First Time Buyer ISA will be limited to £4,000 each tax year. The LISA has the same annual limit.

Another area where the LISA and First Time Buyer ISA are similar is the government bonus – a significant advantage for first-time buyers.

With either ISA, you’ll receive a 25% bonus on your deposits. So, if you add the full £4,000 during the tax year, you’d benefit from a £1,000 bonus, which could help you reach your home ownership goals sooner.

With a LISA, the bonus is paid in the month after a deposit is made. This means your bonus could potentially earn interest or investment returns, which could help you save the required deposit more quickly. In addition, there isn’t a maximum total bonus for the LISA.

In contrast, when saving through a First Time Buyer ISA, you won’t receive the bonus until you buy a qualifying property. The maximum bonus you can receive is £20,000.

This difference in when the bonus is paid addresses one of the criticised features of the LISA: the withdrawal penalty.

If you withdraw money from a LISA before you turn 60 for any reason other than buying your first home, you typically face a 25% penalty. This would mean losing the bonus and a portion of your own contributions. The penalty is reduced to 20% if you’re buying a property that exceeds the price cap.

As the bonus isn’t paid until you buy a property with a First Time Buyer ISA, there is no equivalent withdrawal penalty. As such, it could provide first-time buyers with greater flexibility.

Under current plans, the First Time Buyer ISA will have some of the same restrictions when purchasing a property as the LISA. You must buy with a residential mortgage and the maximum purchase price is £450,000.

Anyone aged 18 and over will be able to open a First Time Buyer ISA.

2. Your First Home scheme

The second initiative, the Your First Home scheme, is similar to the Help to Buy equity loan scheme that ran between 2013 and 2022.

Under the scheme, homebuyers will receive an equity loan equivalent to 20% of the property’s value. You will need a deposit of at least 2.5%. This could help you get on the property ladder sooner than if you had to save a traditional 10% deposit.

In addition, the Your First Home scheme could make mortgage repayments cheaper. As the equity loan will effectively increase the size of your deposit, you may be able to access more competitive mortgage deals.

The equity loan will be interest-free for the first five years. Interest will be charged at 1.5% from year six, rising to 3% from year seven. You don’t have to repay the equity loan until you sell your home, although you can repay it sooner if you wish and can afford to do so. If you don’t sell the property, the equity loan must be repaid before your mortgage is fully repaid.

There are several restrictions when using the Your First Home scheme, which may affect whether it’s right for you:

You must be a first-time buyer who is buying a home in England.
The property must be a new-build.
Your household income must not exceed £110,000 (£140,000 in London).

In addition, there will be a property price cap, which will vary depending on your region. These price caps have yet to be confirmed.

Applications for the Your First Home scheme are set to open in February 2027, with the first equity loans expected to be available from April 2027.

We could help you secure your first mortgage

If you’re ready to search for your first home and apply for a mortgage, please get in touch. We could help you assess the different options to understand which may be right for you, as well as provide guidance throughout the process.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.