Your First Home: will a 20% equity loan be enough in London?

I've spent much of my career advising on Help to Buy schemes, so I read this week's announcement of Your First Home with interest. On first look, it could be very good news for first-time buyers and for the new-build market. It cuts the minimum deposit to 2.5% and adds a 20% government-backed equity loan. That tackles the barrier most first-time buyers struggle with first: saving a deposit while paying rent.

But in London, I don't think the deposit is the main constraint any more. The mortgage left behind is. For developers, that matters as much as it does for buyers, because a scheme only supports sales if the buyers it creates can actually complete.

The scheme was announced on 26 September 2026, with full details, including income limits and price caps, due at the Budget on 28 October. The figures below are illustrations based on the headline proposal. All information is correct at the time of publishing, 28 September 2026.

What 20% means on a London home

Take a £450,000 new-build home:

• 2.5% deposit: £11,250
• 20% equity loan: £90,000
• Mortgage required: £348,750

At 4.5 times household income, that mortgage points to a household income of around £77,500. I've deliberately used a conservative multiple here, since some lenders will stretch further for higher earners. Real affordability assessments also weigh outgoings, credit commitments, dependants and mortgage term. But the point stands: even with the scheme, this buyer needs close to £80,000 a year.

How it compares with London Help to Buy

London Help to Buy recognised the capital's affordability challenge by allowing an equity loan of up to 40% from 2016. With a 5% deposit, the buyer needed a mortgage for just 55% of the price.

Here is the household income each structure would need, using the same 4.5x multiple throughout:

*2.5% deposit, 20% equity loan. **5% deposit, 40% equity loan.

On the same £450,000 home, Your First Home halves the deposit, from £22,500 to £11,250. But it raises the mortgage from £247,500 to £348,750. That's £101,250 more borrowing, and around £22,500 more household income, to buy exactly the same home.

Solving the deposit problem, creating an income problem

A 2.5% minimum deposit is a real positive. For Londoners saving while paying rent, it could bring ownership within reach years sooner.

But it leaves the buyer needing a mortgage for 77.5% of the price, compared with 55% under London Help to Buy. The scheme makes it easier to save enough to buy, and harder to borrow enough.

The real gap is probably wider than income multiples suggest. A 77.5% loan-to-value mortgage usually sits in a higher rate band than a 55% one, so monthly payments and lender stress tests bite harder. Living costs have also risen alongside salaries since 2016. Because lenders assess expenditure as well as income, higher pay doesn't translate one-for-one into higher borrowing.

The question isn't whether a buyer can find a 2.5% deposit. It's whether they can qualify for, and comfortably afford, the mortgage left behind.

The price cap and income cap have to work together

Under the final Help to Buy scheme, London's price cap was £600,000. At that price under Your First Home, the buyer would need a £465,000 mortgage, pointing to household income of around £103,300.

Now set that against a likely income limit. Early reports suggest Your First Home will include a household income cap, and the existing First Homes scheme caps household income at £90,000 in London. If Your First Home adopts something similar, homes at the top of the price range would be out of reach for every eligible buyer, and a £500,000 home would be only just within reach.

The price cap, the income cap and the equity percentage need to be designed together. Otherwise the scheme will qualify buyers on paper for homes they can't finance.

What Help to Buy taught us

The government's latest evaluation of Help to Buy, published this month, offers useful lessons.

It found the scheme particularly benefited buyers in London. It also found that mortgage affordability, not just the deposit, had become a major barrier: 38% of customers in the scheme's final phase couldn't have bought an average local first-time buyer home without it, because they wouldn't have met lenders' affordability requirements.

The evaluation also found that raising London's maximum loan to 40% in 2016 didn't increase first-time buyer mortgage sales or housing supply in the capital, with mixed evidence that it pushed up London prices.

That doesn't match what I saw on the ground. On the London schemes I worked on, the 40% loan clearly supported sales and sales rates. But timing matters. The uplift arrived just as the London market was slowing, and the evaluation itself notes that London residential sales fell by around a quarter the following year. In a declining market, Help to Buy sales were filling a void left by buyers who had stepped back, rather than adding to a rising total. Measured against the wider market, that support can look like no effect at all, when in practice it was holding sales up.

The lesson is that helping individual buyers and delivering more homes are related but not the same thing. Good housing policy has to achieve both.

Why this matters to developers

A development can have the right location, design and pricing. Every sale still has to pass a lender's affordability assessment. Developers will also pay a fee to take part in Your First Home, so they need confidence that the scheme produces buyers who can complete.

If Your First Home creates large numbers of buyers who qualify on paper but can't raise the mortgage, it won't do much for sales rates. Appraisals that assume scheme-driven demand could prove optimistic.

In my experience, the end of Help to Buy didn't remove demand from London first-time buyers. It removed their ability to borrow enough. On the schemes I was working on, first-time buyer reservations fell and international buyers made up a growing share of sales. The government's own evaluation points the same way, estimating that the scheme's closure cut first-time buyer mortgage sales in England by around 10–15%. Your First Home could reverse that, but only if the equity support is enough to make those buyers mortgageable again.

Get it right, and the benefits are wider. Developers gain a larger pool of mortgageable purchasers, lenders lend at lower loan-to-values, and there's more confidence in achievable sales, which supports delivery.

Does London need its own allowance?

I think it does, though not simply a return to 40%. The evaluation's findings on prices are a warning that a bigger loan on its own can feed into higher prices rather than more buyers.

There's a design lesson here too. Under Help to Buy, some London developments could be sold entirely through the scheme. In those locations, values were effectively set by Help to Buy sales alone, which risked inflating prices beyond what the wider market would support. It could also leave buyers exposed when they later came to sell or remortgage. A future scheme would benefit from limiting the proportion of homes in any one development that can be sold with an equity loan. That keeps pricing anchored to the open market while still giving first-time buyers meaningful access.

There's also a fair argument for keeping the loan at 20%: the same public capital supports roughly twice as many buyers. But supporting twice as many prospective buyers achieves little if many of them still can't complete.

The better question is what level of support turns a prospective first-time buyer into a mortgageable purchaser. The answer won't be the same in London as elsewhere. The options include a higher maximum percentage for London paired with sensible price caps, support linked to local property values, or support that varies with each buyer's affordability gap.

The scheme should be designed around the transaction it's meant to make possible, not a single national percentage.

Buyers will need good advice

An equity loan is a share of the property's value, not a fixed debt. On the £450,000 home in my example, a 20% share starts at £90,000. If the home were later worth £600,000, it would be £120,000.

That isn't necessarily a problem, because the loan reduced the mortgage needed at purchase. But buyers need to understand how it works, what happens if values rise or fall, and how they can repay it or remortgage later. The quality of advice will matter almost as much as the headline percentage, and developers' sales teams will be on the front line.

Judging success

For some London households, 20% will be enough. For many, it won't.

Your First Home's success shouldn't be judged by how many people technically qualify for it. It should be judged by how many become genuine, mortgageable purchasers who go on to buy.

If the government gets that right, the scheme could do more than help first-time buyers. It could support the confidence, demand and sales needed to deliver more new homes.

At Studio Ellis, we advise housebuilders and developers on London residential schemes, from development appraisals and pricing to marketing and sales strategy. As Your First Home takes shape, we can help you test whether your pricing and unit mix work for the buyers the scheme is designed to reach. We can also shape a marketing and sales strategy that reaches them, and plan how the scheme fits into your sales programme from launch through to completion. To discuss your scheme, get in touch at lucy@studioellis.net.