Back in September, we discussed the new 2.5% deposit scheme when most of the specifics were still a bit of a mystery. Fortunately, the Budget on 28 October has finally filled in the blanks, and Reading is one of the first areas in England to get a published price cap. If you are hoping to buy your first home locally, here is exactly where things stand today.
At a Glance
- As a first-time buyer in England, you will be able to buy a new-build property with just a 2.5% deposit, backed by a 20% government equity loan.
- If you are looking in Reading, the maximum property price is capped at £375,000. We are still waiting on the official figures for Wokingham, Bracknell, and West Berkshire.
- To qualify anywhere outside London, your total household income simply needs to be £110,000 or less.
- The great news is that the equity loan is completely interest-free for the first five years. It then moves to 1.5% in year six and 3% from year seven onwards. Just keep in mind that the final amount you repay is tied directly to your home’s market value.
- Applications are expected to open in February 2027, and the government also announced a couple of handy ISA updates to help you build your deposit in the meantime.
What Did the Budget Confirm?
The government has just published its guidance on Your First Home. Here is how it works for you. You put down a deposit of at least 2.5%, the government provides a 20% equity loan, and a participating lender covers the rest with a repayment mortgage.
This scheme is for first-time buyers in England choosing a new-build home from a participating developer. It must be your main home, and lenders will still run their normal credit and affordability checks.
If you remember Help to Buy, the idea is very similar. That scheme ended in 2023, and Your First Home replaces it with its own rules. These include a lower minimum deposit, strict income limits and local price caps.
What Could £375,000 Buy in Reading?
Reading’s £375,000 cap sits above what first-time buyers typically pay in the area. The Office for National Statistics noted that in August 2026, first-time buyers in Reading paid £309,000 on average. A typical terraced home sold for £353,000, while the average flat went for £224,000. The average semi-detached home did sit above the cap at £443,000.
Keep in mind that these averages cover all homes, not just new builds, and new-build homes can often be priced higher than similar older properties nearby.
Practically speaking, this cap might suit a flat or a smaller house better than a large family home. It really just depends on which local developments choose to take part.
We are still waiting on the published caps for Wokingham, Bracknell Forest and West Berkshire, which includes Newbury. It is definitely worth checking the exact figure for your own area once the full list comes out.
If you maxed out the full £375,000, your split would look exactly like this:
- Your 2.5% deposit: £9,375
- The 20% equity loan: £75,000
- Your mortgage: £290,625
Buying A New Build: Points to Watch
Buying a new-build home does come with a few unique quirks. For instance, your lender’s valuer will assess the property independently. Occasionally, they might value it a bit lower than the price you agreed with the developer, which could leave a financial gap for you to cover.
Also, if you reserve a home before it is fully built, you need to ensure the completion date lines up perfectly with your mortgage offer expiry date, especially since these timeframes really do vary between lenders. Lastly, it is always a smart move to ask your solicitor to review the reservation agreement and any developer incentives before you officially commit.
Could Your Household Income Rule You Out?
To qualify for the scheme, your total household income must be £110,000 or less if you are buying outside London, or £140,000 or less within London. For someone buying alone, this gives you plenty of breathing room. However, for a couple where both of you work full time, that limit can be reached a lot quicker than you might think.
Since many people living in Reading commute into London, this is something worth checking quite carefully. The higher limit is described as applying within London. So, if you are looking to buy in Reading, the £110,000 limit is the one you need to plan around, regardless of whether one of you works in the city. We are waiting on the full eligibility rules before applications open, which should clarify exactly how household income is calculated, particularly regarding your bonuses and self-employed income.
What Does the Equity Loan Cost After Year Five?
For the first five years, you pay absolutely no interest on the equity loan. From year six, the government charges 1.5%, which then rises to 3% from year seven. To give you an idea, on a £75,000 loan, you are looking at about £94 a month in year six and around £188 a month after that. This sits on top of your usual mortgage payments, and it is important to remember that paying this interest does not reduce your original loan balance.
To help picture this, the government has published a helpful example comparing monthly costs for a £300,000 new-build home. This model assumes a standard 30-year repayment mortgage at a 5% interest rate for both options. Just note that this specific example does leave out extra expenses like fees, insurance, and your normal running costs.
Looking at these figures, the Your First Home scheme costs less each month initially, though that financial gap does narrow once the interest kicks in. Keep in mind that the government’s example uses the exact same rate for both mortgage options. In reality, your actual mortgage rate will often differ depending on your deposit size and your chosen lender. Also, this example does not factor in the cost of repaying the equity loan itself, which depends entirely on your home’s market value when you settle the balance.
The other crucial point to grasp is how the loan is repaid. You generally pay back 20% of what your home is worth at that specific time, not just the original £75,000 you borrowed. So, if your £375,000 property rises in value to £420,000, you would need to repay £84,000. Conversely, if the value falls to £340,000, your repayment drops to £68,000.
When Can You Apply?
Not quite yet. The government plans to open early registration before the end of 2026. This gives you all the helpful eligibility and price cap details without committing you to a thing. Full applications should officially open in February 2027, with the first purchases following in April 2027. The final list of participating developers and lenders will also be announced just before the launch.
What You Can Do in the Meantime
Just because we are waiting for applications to open does not mean you need to sit still. Here are a few helpful things you can get in order right now:
- Carefully add up your total household income, including any bonuses or overtime, so you know exactly where you stand against that £110,000 limit.
- Review your credit reports and make absolutely sure you are registered on the electoral roll at your current address.
- Keep your rent and other regular payments perfectly up to date, ideally paying them from a bank account in your own name.
- Keep a close eye out for new-build developments in Reading that sign up to the scheme once they are officially named.
Saving For a Deposit? The New First Time Buyer ISA
If you are still building up your deposit savings, the Budget also announced a brand new First Time Buyer ISA. This is set to launch in April 2029, and it will replace the current Lifetime ISA for new savers.
Here is how it works. You can pay in up to £4,000 a year, and the government will add a generous 25% bonus when you use those funds to buy your first home. So, if you save the full £4,000 a year, you would earn a £1,000 bonus for every year you save. The total bonus is capped at £20,000 overall, and the property must cost £450,000 or less. Unlike the Lifetime ISA where you must open an account before turning 40, this new option has absolutely no upper age limit.
Lifetime ISAs will stop being offered to new savers once the new account arrives in April 2029. Therefore, if you are under 40 and putting money away right now, a Lifetime ISA remains an option in the meantime. Just make sure to check the specific rules with your provider before you decide to open one.
Already Have a Lifetime ISA? What Has Changed
If you are already saving into a Lifetime ISA, you can absolutely keep using it. The Budget also changed a tricky rule that used to catch people out. Until now, using your Lifetime ISA on a property costing more than £450,000 meant a strict 25% charge, which could leave you with less than you originally paid in.
Fortunately, from 29 October 2026, that charge drops to 20% for those purchases. In practice, this means you lose the government bonus, but you get to keep your own savings and interest. Just remember that the 25% charge still applies to any other withdrawals that are not used for a first home.
What If a New Build Is Not for You?
Because Your First Home only covers new builds, it will not suit everyone. If you prefer an older property, some lenders offer their own low-deposit mortgages. These include zero-deposit deals for those with a strong rent record, 2% deposit mortgages, and options with a fixed £5,000 or £10,000 minimum deposit. Lending criteria can be tighter here, and these products change frequently. We compared these alternatives in our earlier article on how the 2.5% scheme compares with other first-time buyer options.
Whichever route you choose, lenders may closely check your credit file, rent payments, and recent bank statements. To help you prepare, our guide on keeping your credit file mortgage-ready covers all the practical steps. Also, our article on how much first-time buyers can borrow in Reading and Berkshire explains exactly how lenders calculate your affordability.
How This Could Look for a Reading Couple
This example is purely for illustration and does not describe a real client.
Let’s look at Ellie and Marcus, who currently rent a flat in Caversham. Ellie works locally, Marcus commutes into London, and together they earn around £98,000 a year, which includes his annual bonus. They have managed to save £11,000 and really like the look of a two-bedroom new-build flat on the edge of Reading, priced at £300,000.
Using Your First Home, their 2.5% deposit would be just £7,500, which comfortably leaves some savings for fees and moving costs. However, before going any further, a few important questions would shape their decision:
- Their income sits nicely under the £110,000 limit, but exactly how would Marcus’s bonus be counted? Could a particularly good year accidentally take them over the limit before they apply?
- Is this specific development taking part in the scheme, and does the official valuation support the asking price?
- How will their monthly costs compare once that equity loan interest starts in year six?
- Would a slightly older resale flat nearby, bought with a standard low-deposit mortgage, cost them less overall?
There is no single right answer for Ellie and Marcus. It really just depends on the final scheme rules, the specific lender criteria at the time, and exactly how long they plan to stay in the property.
How Greenstone Mortgages Can Help
Since we are not tied to any single lender, we can easily compare Your First Home against the wider market for you. We will show you exactly what each option might cost, not just on day one, but over the years you really plan to stay.
You can find out more about how we support first-time buyers online. Our appointments are completely free, available seven days a week, and we can usually speak with you within 48 hours of your enquiry.
Frequently Asked Questions
Is the £375,000 cap the price of the home or the size of the mortgage?
It is the price of the home. The cap sets the maximum purchase price for a new-build home in Reading under the scheme.Can I use the scheme to buy in Wokingham or Bracknell?
Yes, as long as you are buying a new-build home from a participating developer within that area’s price cap. Those caps have not been published yet.Is Your First Home the same as Help to Buy?
No. It works in a similar way, with a government equity loan on a new-build home, but it is a separate scheme with its own deposit, income and price rules.Do I have to repay the equity loan if I remortgage?
That has not been confirmed. The government has said it plans to publish details on repaying the loan when selling or remortgaging before applications open.Should I wait for the scheme before I start looking?
There is no single right answer. It depends on your savings, your income, whether you want a new build and how the costs compare with other options, which is something we can talk through with you now.Speak to Helen and David
If you are thinking about buying in Reading or anywhere in Berkshire, we would be happy to help you make sense of the new scheme and the alternatives. Get in touch with Helen and David to book a free appointment.
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
This article provides general information and does not constitute personalised mortgage advice. Details of Your First Home and the ISA changes are based on government guidance and Budget announcements published on 28 October 2026 and may change once full details are published. Mortgage rates, products and availability can change, and all applications are subject to lender criteria and affordability assessments.
Greenstone Mortgages is a trading name of WIS Contractor Mortgages Limited, which is authorised and regulated by the Financial Conduct Authority. Our Financial Services Register number is 824411. We are a credit broker, not a lender. Registered in England and Wales with company registration number 11496588.