Your First Home: Buyers delay purchases until after Budget, experts reveal

First-time buyers are putting purchases on hold while they wait for the full rules of Your First Home, the government’s 2.5% deposit scheme, mortgage experts have told Newspage.

Matt Coulson of Heron Financial on the two questions first-time buyers are asking about Your First Home.

Ahead of the Budget on 28 October, mortgage brokers said borrowers want to know whether they will be eligible for the scheme that would allow first-time buyers in England to put down a 2.5% deposit on a new-build home, supported by a 20% government-backed equity loan.

However, with key details yet to be confirmed, brokers say uncertainty over eligibility, property price caps and the long-term cost of the loan is leaving some buyers unsure whether to proceed with a purchase or wait for further announcements.

Matt Coulson, Founder at Rickmansworth-based Heron Financial, said: “Some buyers are holding off, which is the irony of announcing a scheme before its rules exist: it can freeze the very people it’s meant to help, who’d sooner wait than buy now and miss out.

“On the equity loan, the big misunderstanding is that it’s free money. It isn’t. It’s a loan and a stake in your home. The interest-free period ends and charges start, and crucially you repay a percentage of the future value, so if your home goes up, you pay back more than you borrowed. 

"From the Chancellor on the 28th, I want the detail published quickly, because the vacuum is doing harm now, and I want the caps to flex with local prices, so it doesn’t shut out the buyers in expensive areas who most need it. Clarity first, then good design."

Toby Quanstrom, Director at Eastbourne-based Quanstrom Financial, said Your First Home risks repeating the mistakes from previous schemes.

He added: “This scheme will be a saving grace for many customers, but I hope the government learnt from where the old scheme fell short. The old scheme, Help to Buy, made it easy to get in and hard to get out, and Your First Home risks repeating the mistake. 

"By spring 2025, more than 100,000 Help to Buy owners were paying interest, averaging £107 a month. Clearing the loan means repaying a share of what the home is worth today, often through a far bigger remortgage. 

"Lenders did stress-test whether buyers can afford to get in, but there were, and still are, several customers who are left in a difficult position when trying to get out of their help to buy loan. On 28 October, the Chancellor should give a clear indication on how the exit would work.”

Another broker said some of his clients are waiting until Budget day before committing.

Jamie Alexander, Mortgage Director at Romsey-based Alexander Southwell Mortgages, said: "The questions first-time buyers are asking me are always the same. Will I qualify, and what does the equity loan actually cost me later? That is where the misunderstanding sits. People focus on the deposit and the interest-free period and do not think far enough ahead.

“The equity loan is a percentage of the property value, not a fixed amount. If your home goes up in value, so does what you owe. I have a handful of clients holding off until the Budget to see the income caps and local price limits before committing.

"What I want from the Chancellor is clear numbers, worked examples of future costs, and honesty about what happens after the interest-free period ends. The headline deposit figure is not the full picture."

Others want the Chancellor to show buyers what the equity loan will cost them before the scheme launches.

Tracey Dixon, Owner at Cardiff-based Pure Mortgage and Protection, said: "A smaller deposit could open the door, but buyers need to understand what sits behind it. I’d like the Chancellor to confirm eligibility, price caps, the launch date and clear, worked examples of future costs.

“Buyers need to understand how repayment would change if their home rises in value. A 2.5% deposit makes a great headline. The real test is whether the scheme makes owning a home affordable for the long term."

Nouran Moustafa, IFA at Roxton Wealth, wants clarity on what happens to the equity loan when buyers sell or remortgage.

She commented: "The biggest question is: ‘Should I wait?’ My answer is no, not automatically. Your First Home could be brilliant for someone who can afford the mortgage but cannot build a traditional deposit.

"But I would not abandon a good purchase today for a scheme whose full rules we still do not know. The biggest misunderstanding is the 20% equity loan. Buyers hear ‘interest-free’ and think ‘free money’. It isn’t.

“We still need to know exactly what happens after the interest-free period and how repayment will work. On 28 October I want clarity on the income cap, regional price caps, launch date, later charges and what happens when someone sells or remortgages.

"A 2.5% deposit gets you through the front door. The important question is what the other 97.5% costs you afterwards."

David Stirling, Independent Financial Adviser at Belfast-based Mint Wealth, said that a 2.5% deposit would not automatically make a home affordable.

He commented: "The 2.5% deposit is the bit that gets first-time buyers through the door, but the small print will decide whether they can actually buy the house. A tiny deposit doesn’t magically turn a £300,000 new-build into an affordable property.

"There’s also a danger of viewing the 20% government equity loan as free money. It isn’t and buyers need to understand the longer-term implications rather than simply focusing on how little cash they need on day one.

“I’d like the Chancellor to give us clarity rather than complexity on 28 October: sensible income and regional property caps, a clear launch date and, crucially, exactly what that equity loan will cost after the interest-free period. If advisers need a flowchart and a calculator to explain it, we’ve probably missed the point."

Directors should not cut their pay to get under the cap, one expert warned.

Harvey Dhillon, Founder & CEO at Zmartly, said: "A lot of my clients are asking me about buying their first home. On Your First Home, I tell them what nobody knows for certain yet: whether its income cap will count company profit, which year's income it will test, and whether a partner's pay counts too.

"The government has only promised a household income cap, with the detail at the Budget. It does say household, though, so couples should plan on both incomes counting.

“I also tell directors not to cut their salary or dividends to slip under a limit nobody has published. For someone on a payslip, the wait is a nuisance. For someone who sets their own pay, it's the whole question.

"The equity loan carries a later cost that's easy to miss: repaying it from company profit generally means taking the money out as salary or dividends first, and paying tax on it. 

"On 28 October, the Chancellor should say which year's income the cap will test, and whether profit left in a company counts as the director’s.”