A £6,250 deposit could open the door to an eligible £250,000 new-build home following the Government’s £4.7 billion Budget commitment to Your First Home. But how much protection would buyers have if prices fell? Moving Compared, the UK’s leading home moving hub helping buyers, sellers and movers compare trusted conveyancers and surveyors, has modelled four scenarios to explain what a smaller deposit could mean when selling.
Your First Home will support eligible buyers purchasing participating new-builds with a 2.5% deposit and a 20% government-backed equity loan. The Budget also included a new First Time Buyer ISA, changes allowing Lifetime ISA holders to access savings without the previous withdrawal penalty, and measures intended to increase housing supply.
While these measures aim to make homeownership more accessible, Moving Compared’s analysis highlights how even a modest price fall could affect buyers starting with a small deposit. Crucially, Your First Home would not involve a standard 97.5% mortgage. On a £250,000 purchase, the buyer would contribute £6,250, the government £50,000 and the mortgage lender £193,750.
If the government’s repayment tracks 20% of the property’s value, it would absorb one-fifth of any price fall. The buyer’s equity would absorb the remaining four-fifths, assuming the mortgage balance stayed unchanged.
Mortgage capital repayments could help buyers build equity over time, although selling costs, interest and other charges may affect their eventual financial position. Moving Compared warns that while smaller deposits could bring homeownership within reach for more first-time buyers, understanding the financial implications of selling is just as important as securing the initial mortgage. Buyers should seek clear conveyancing advice on equity-loan repayment obligations, potential restrictions and the costs of an early sale before committing to a purchase.
