Your First Home scheme sets £140,000 London income cap and £4.7bn lending

The government has confirmed details of Your First Home, an equity loan scheme that lets eligible first-time buyers purchase new build homes with a deposit as low as 2.5%. The deposit is backed by a 20% government equity loan.

We reported in October that the Your First Home income limits were reportedly set to rise to £110,000 outside London and £140,000 in the capital ahead of the Budget.

Household income caps will be £140,000 inside London and £110,000 outside it. Price caps will be based on local authority median prices, with caps of £650,000 in inner London and £500,000 in outer London.

The maximum deposit is 15%. The equity loan carries a five-year interest-free period, followed by a gradual increase. Chancellor John Healey confirmed £4.7bn in government-backed lending in the Budget, and the government expects the scheme to help 70,000 households.

Developers will be expected to contribute when they sign up, on a sliding scale intended to protect smaller developments. Funding will be capped each year, and the government says it will work with developers and lenders to monitor demand.

Richard Donnell, executive director at Zoopla, said the firm estimates over a third of new homes would be eligible, with up to 30,000 first-time buyers a year benefiting. He said that would cost the government about £1.5bn a year, so the scheme looks set to run for three years. He added that it would have around half the impact of the old Help to Buy scheme.

Scott Clay, director of private clients at Together, said the income cap may affect buyers in the London commuter belt, who miss out on the capital's higher limit while facing higher South East prices.

Sarah Bush, head of residential at Cheffins, said the scheme applies only to new homes and that the equity contribution is a loan, not a gift. She said buyers may need to remortgage or find the cash to repay it if their home does not rise in value.