First-Time Buyer Schemes

Understanding first-time buyer schemes

The UK government has introduced several schemes to help first-time buyers get onto the property ladder. Each has different eligibility rules, price caps and trade-offs. This page explains the four main schemes currently available.

Lifetime ISA (LISA) — the best free money available

The LISA is one of the most powerful savings tools for anyone under 40 buying their first home. The government adds 25% to everything you save, up to £4,000 per year — that's £1,000 in free money annually. The money must stay in the account until you either buy your first home (priced at £450,000 or under) or reach age 60. The catch: there's a 25% withdrawal penalty if you access the money for any other reason, which effectively means losing some of your own contributions. For a first home purchase under £450,000, this is the single most valuable scheme available.

LISA vs Help to Buy ISA

The Help to Buy ISA closed to new applicants in 2019 (existing accounts can be used until 2030). The LISA replaced it with a higher annual limit (£4,000 vs £2,400) and a higher bonus cap (£1,000/year vs £3,000 lifetime). If you have an existing Help to Buy ISA, you can transfer it to a LISA before age 40 — but check the transfer rules and whether you've already used your LISA allowance.

Shared Ownership — pros and cons

Shared Ownership lets you buy between 25% and 75% of a property and pay below-market rent on the rest. The main appeal is the much smaller deposit required (5% of your share, not the full price). The downsides are significant: you pay both a mortgage on your share and rent on the rest; the property is always leasehold, meaning you'll pay service charges and ground rent; and staircasing (buying more of the property) can be expensive and complicated. Run the numbers carefully — the combined mortgage and rent payment is sometimes higher than a full mortgage would be on a smaller property.

First Homes — new-build at a discount

First Homes offers a 30% discount on new-build properties for first-time buyers and key workers in England. The discount stays with the property in perpetuity — when you sell, the next buyer also gets 30% off the market price. The price cap (£250,000 after discount outside London) limits this scheme to lower-cost areas and more affordable new-build developments. Availability depends on developers participating in the scheme in your area.

Mortgage Guarantee Scheme — enabling 5% deposits

The Mortgage Guarantee Scheme allows lenders to offer 95% LTV mortgages (5% deposit) on properties up to £600,000, by the government providing a partial guarantee to lenders. This scheme doesn't subsidise your deposit — it simply makes 5% deposit mortgages more widely available from mainstream lenders who might otherwise not offer them. The trade-off is higher monthly payments, more total interest and potentially higher rates compared to lower-LTV mortgages.

The deposit percentage matters enormously

Mortgage pricing is heavily tiered by loan-to-value (LTV). Moving from 95% LTV (5% deposit) to 90% LTV (10% deposit) typically reduces your rate by 0.5–1%. Moving to 75% LTV (25% deposit) can reduce it by 1.5–2% compared to 95% LTV. On a £250,000 mortgage, a 1% rate difference is approximately £130 per month — over a 5-year fix, that's £7,800. Saving a larger deposit, even if it delays buying, often pays off substantially.