First time buyer schemes and incentives to help tenants become homeowners

Saving for a deposit while paying rent can feel like you’re trying to fill a bucket with a hole in it.

For many aspiring homeowners, the dream of owning your first property feels further away than ever, especially when you see the average deposit hitting a staggering £61,090 [1].

I’ve seen countless clients feel stuck in the rental cycle, but I want to reassure you that there are practical ways to break free. Government schemes and incentives are specifically designed to give first-time buyers the leg-up they need.

Key Takeaways

• The biggest barrier for most first-time buyers is saving a large deposit while managing high rental costs and the rising cost of living.
• Government incentives like the First Homes Scheme and Shared Ownership can significantly lower the upfront cost of buying a property.
• Savings tools like the Lifetime ISA (LISA) offer a 25% government bonus, helping you boost your home buying deposit faster.
• The permanent Mortgage Guarantee Scheme makes it possible to secure a mortgage with a deposit as low as 5%.
• Getting expert advice early from a mortgage adviser is vital to understand which scheme best fits your personal circumstances.

Understanding the First-Time Buyer Challenge

Getting on the property ladder is a major life goal for many tenants, but the path there can feel incredibly challenging in today’s market.

It’s not just about finding the right house; it’s about overcoming the financial hurdles that stand in the way, and that starts with the deposit.

The Difficulty of Saving a Deposit While Renting

The single biggest obstacle for most renters is saving a large enough deposit.

With the average UK private rent in climbing to £1,339 per month in May 2025, there’s often little left over at the end of the month [3].

This financial pressure is immense.

I’ve spoken with so many people who feel like they are running on a treadmill, working hard but getting no closer to their goal of homeownership.

The data backs this up, showing that only 29% of renters can pay for a rental deposit from their current account, with many having to borrow money just to move into a new rental property [2].

This constant financial stretch has a real psychological impact. It can feel like your life is on hold, preventing you from putting down roots and gaining the independence you want. When you’re paying your landlord’s mortgage every month, it’s completely understandable to feel frustrated that you can’t build equity in a property of your own. The goal is to find a way to redirect that money into your own future.

How Current Housing Market Conditions Impact Affordability

The housing market itself adds another layer of difficulty.

While it’s encouraging that over 341,000 people bought their first home in 2024, the landscape they entered is tough [1]. Property prices remain high, and the average age of a first-time buyer has risen to 33, two years older than a decade ago [1]. This isn’t surprising when you consider that a typical first home costs around £311,000 [1].

Many aspiring buyers I speak to worry about market volatility and the strict criteria attached to government schemes.

There’s a real fear of saving for years only to find the goalposts have moved, or that the home they can afford with a scheme comes with restrictive rules on selling it later.

It’s these affordability challenges, created by the gap between wage growth and property price inflation, that have led to what the Building Societies Association calls the 2.2 million “missing” first-time buyers from the market.

Understanding how a mortgage and deposit work in this context is the first step toward building a realistic plan.

Checking Your Readiness to Buy

Do you truly understand what it takes to be ready to buy your first home?

It’s about more than just having a deposit.

It involves a clear understanding of your financial situation and the steps ahead.

Taking the time to prepare early will save you a lot of stress and put you in a much stronger position as a buyer.

Before you go any further, check if you have the following sorted:

• Proof of Income: Lenders will need to see your last three to six months of payslips and often your P60 to verify your salary.
• Proof of Identity & Address: Have your passport or driving licence ready, along with recent utility bills or bank statements.
• Deposit Evidence: You’ll need to show bank statements proving where your deposit will come from.
• Credit Report: Check your credit score with an agency like Experian or Equifax. A healthy report is essential, so it’s wise to see if is your credit score mortgage ready.
• An Agreement in Principle (AIP): This is a statement from a lender confirming how much they would likely lend you. It’s not a formal mortgage offer, but it shows sellers and estate agents you are a serious buyer.

Gathering these documents early on makes the whole process smoother.

How Dedicated Support Can Turn a Stressful Process into a Managed One

Understanding the mortgage market alone can be overwhelming, especially with the added layer of government schemes.

This is why getting expert advice early can help with preparing your finances, explain which schemes you’re eligible for, and find mortgage products that are compatible with them.

First-time buyers often worry about hidden costs or being pushed towards a certain lender.

That’s why choosing an independent, “whole of market” adviser is so important. They work for you, not the lender and can guide you through the whole process from securing an Agreement in Principle to managing the mortgage application from start to finish.

A Comparison of Current First Time Buyer Schemes

With several government-backed incentives available, it can be hard to know which one is right for you.

Each scheme is designed to help with a different affordability challenge, from reducing the purchase price to boosting your deposit.

With the old Help to Buy equity loan scheme now closed, the landscape has shifted. The main solutions you’ll come across are the First Homes scheme, Shared Ownership, the Mortgage Guarantee Scheme, and the Lifetime ISA.

Each one works differently and is suited to different financial situations.

Source Data: GOV.UK

The First Homes Scheme: Buying at a Significant Discount

This scheme directly tackles high property prices by offering homes at a substantial discount.

The First Homes scheme allows local first-time buyers and key workers to purchase a new-build property for at least 30% less than its market value [4].

This discount can be a game-changer, making homes affordable in areas where people have been priced out. The goal is to help people buy in the communities where they live and work.

However, there’s a catch.

The discount stays with the property forever. When you decide to sell, you must pass on the same percentage discount to the next buyer, who must also be an eligible first-time buyer.

This can limit your pool of potential buyers and may affect the property’s appreciation compared to open-market homes. It’s a fantastic way to get on the ladder, but you need to be aware of the long-term restrictions.

First Homes Scheme: Income Caps and Local Connection Rules

To qualify for the First Homes scheme, you need to meet both national and local criteria.

Nationally, your household income cannot exceed £80,000 (£90,000 in London). But beyond that, local councils have a significant say. They set their own rules to prioritise people with a strong local connection—for example, if you’ve lived or worked in the area for a certain number of years. They also often give preference to key workers, such as nurses, teachers, or police officers.

These local rules are designed to help communities retain local people who might otherwise be priced out.

So, before you set your heart on a First Homes property, you must check the specific eligibility criteria on your local council’s website to see if you qualify.

Shared Ownership: How to Buy a Share of Your Home

Shared Ownership offers a more gradual way to get onto the property ladder.

Instead of buying a whole property, you purchase a share you can afford—typically between 10% and 75%—and pay rent on the rest [5].

This is a popular option because it significantly lowers the amount you need for a deposit and a mortgage.

I worked with a client, Holly, who was on a single income and found it impossible to save for a full deposit while renting. By using Shared Ownership to buy a 75% share, her deposit became much more achievable, and she successfully bought her first home.

This route provides a way in for those who might otherwise be locked out of the market. It’s a great example of how you don’t always need a huge deposit if you’re aware of the different types of mortgages for first time buyers and alternative schemes.

Understanding the 2025 Scheme Changes

The Shared Ownership scheme has recently been updated to make it more buyer-friendly.

The new model, effective from 2025, has introduced some important changes that address common complaints about the older version of the scheme. The key improvements include:

• Lower Initial Shares: You can now buy an initial share as low as 10%, down from the previous minimum of 25%, making it more accessible [5].
• 10-Year Repair Warranty: For the first 10 years, your housing association will contribute towards the cost of some essential repairs, reducing the fear of unexpected bills for a home you don’t fully own [5].
• Easier Staircasing: The process of buying more shares has been made more flexible [5].

These changes are designed to make the scheme a fairer and more attractive option for first-time buyers.

What is ‘Staircasing’ in a Shared Ownership Agreement?

If you choose Shared Ownership, your journey doesn’t have to end with owning just a share.

“Staircasing” is the process of buying additional shares in your home over time. Each time you staircase, you increase your ownership percentage and reduce the amount of rent you pay to the housing association.

The ultimate goal for most shared owners is to staircase up to 100% ownership, at which point you no longer pay any rent and own the property outright.

The updated 2025 scheme has introduced more flexible staircasing options, aiming to make it easier and more affordable to buy more of your home [5].

Previously, the process could be rigid and expensive. The new rules are designed to address those frustrations, giving you a clearer path to full homeownership.

It’s important to factor in the costs of staircasing, such as valuation and legal fees, when planning your finances.

Calculating the Full Costs of a Shared Ownership Property

While Shared Ownership is a lifeline for some first time buyers eager for another route onto the ladder, it’s important to understand all the costs involved.

Although a smaller mortgage and a smaller deposit are required, the monthly costs don’t stop there. You also have to budget for service charges, ground rent, and all maintenance costs, even though you don’t own 100% of the property.

While it can be a great option, I’ve also heard from people like Diana, a buyer in London, who felt trapped by high service charges and difficulties when she tried to sell, describing it as a “nightmare.” The government has tried to address these issues with the updated 2025 scheme, which includes a 10-year warranty for repairs [5].

It’s vital to use a shared ownership calculator and speak with an adviser to get a full picture of the total monthly commitment before you proceed.

The Mortgage Guarantee Scheme for 5% Deposits

For many, the biggest hurdle to homeownership is the deposit, and this scheme is designed to help with that exact problem.

Made permanent in July 2025, the Mortgage Guarantee Scheme encourages lenders to offer more 95% Loan-to-Value (LTV) mortgages by providing a government guarantee on the loan [7].

This means you can buy a home with a deposit as small as 5% if you qualify for a 95% mortgage with participating lenders.

The scheme is a direct solution to the deposit barrier, although it’s worth noting that mortgages with a higher LTV often come with slightly higher interest rates.

Even so, it has opened the door to homeownership for thousands who may have struggled to save for a larger deposit.

Key Scheme Features and Eligibility Requirements

This scheme is ideal for people who have a stable income and can comfortably afford monthly mortgage payments but haven’t had the years it can take to save a 10% or 15% deposit.

Other scheme features and eligibility rules include:

• You must be buying a main residential property in the UK (not a second home, buy-to-let, or new build; most lenders do not allow new-builds under this scheme).
• The property purchase price must be £600,000 or less.
• Your deposit must be between 5% and 9.99% of the property value, resulting in a 91%–95% loan-to-value (LTV) mortgage.
• The mortgage must be a repayment mortgage as interest-only loans are not eligible.
• You must pass the lender’s standard affordability and credit checks (no specific government criteria for income/circumstances beyond what lenders normally require).

Using the Lifetime ISA (LISA) Bonus to Grow Your Deposit Savings

The Lifetime ISA, or LISA, is one of the best deposit savings tools available for first-time buyers.

It’s a tax-free savings account where the government gives you a 25% bonus on everything you save, up to a maximum of £1,000 per year.

You can save up to £4,000 annually, and that £1,000 bonus is a straight gift from the government to help you reach your deposit goal faster [6].

You can open a LISA between the ages of 18 and 39 and contribute until you’re 50.

But remember, if you withdraw the money for any reason other than buying your first home or for retirement after 60, you’ll face a penalty, so it’s a dedicated savings tool.

Understanding the LISA’s £450,000 Property Price Cap

The Lifetime ISA is a fantastic savings tool, but it comes with one major restriction you need to be aware of.

The value of the property you buy using your LISA funds cannot be more than £450,000 [6].

This cap is the same across the entire UK, with no adjustments for higher-priced areas like London and the South East. For many buyers in these regions, this limit can be a significant problem, as even starter homes can exceed this value.

This has led to calls for the government to reform the scheme, perhaps by introducing regional price caps or linking the limit to house price inflation so it doesn’t become outdated. For now, it’s a fixed rule. Before you commit your savings to a LISA, you should research property prices in your desired area to make sure the scheme is a practical choice for you.

The Official Process for Withdrawing LISA Funds for a House Purchase

When you’re ready to buy your home using your Lifetime ISA, you don’t just withdraw the cash yourself.

The process is managed by your solicitor or conveyancer to ensure everything is done by the book. Once your offer on a property has been accepted, you’ll instruct your conveyancer, who will then handle the withdrawal on your behalf. They will complete a declaration form and send it to your LISA provider.

The funds, including all your contributions and the government bonus, are then transferred directly from your LISA provider to your conveyancer. They are not sent to your personal bank account.

This formal process is in place to make sure the money is used solely for the property purchase as per the scheme’s rules. It typically takes up to 30 days for the funds to be released, so it’s important to let your conveyancer know about your LISA early in the process.

Your First Home Purchase Action Plan

The journey to homeownership can feel long, but breaking it down into a clear action plan makes it manageable.

Think of it as a series of steps.

1. First, focus on assessing and optimising your finances with a healthy credit score and supercharging your deposit savings with tools like a Lifetime ISA.
2. Next, speak to a mortgage adviser to get an Agreement in Principle, so you know exactly what you can afford.
3. With that in hand, you can research the government purchase schemes and find the one that fits your situation, whether that’s Shared Ownership or the First Homes scheme.
4. Finally, once your offer is accepted, you’ll engage a conveyancer to handle the legal side and guide you through to completion.

By following these steps and getting expert help along the way, you can turn a process that feels overwhelming into one that feels structured, supported, and exciting.

Ready to Take the Next Step?

Making sense of first-time buyer schemes can feel complex, but you don’t have to do it alone. To help you make sense of it all, I’ve created a comprehensive guide that breaks down every stage of the journey. Download your free First-Time Buyer Roadmap to get a clear, step-by-step plan for turning your dream of homeownership into a reality.

Sources

[1] lloydsbankinggroup.com/media/press-releases/2025/halifax-2025/first-time-buyer-market-rebounds.html
[2] independent.co.uk/news/uk/home-news/rent-house-deposit-landlord-tenancy-b2725295.html
[3] landlordzone.co.uk/news/latest-tenant-rent-arrears-drop-by-20-during-2025
[4] gov.uk/first-homes-scheme
[5] gov.uk/shared-ownership-scheme
[6] gov.uk/lifetime-isa
[7] gov.uk/government/publications/2025-mortgage-guarantee-scheme