London first-time buyers hoping the government’s new scheme will help them buy a home with a second bedroom face a limited choice. New analysis suggests most of the new flats currently on sale are too expensive to come within its price caps.
Zoopla research reported by The Times on 2 November found that just 32% of newly built two-bedroom flats marketed in London fall within the Your First Home limits. The remaining 68% are priced above them.
Price-cap fit does not confirm full eligibility. Developer participation and buyer requirements also apply.
Willow’s earlier explanation of Your First Home examined the promise of a smaller deposit. The new findings expose a different obstacle: qualifying for help may still leave buyers struggling to find a home that suits them.
The second bedroom changes the search
For a couple planning to start a family, or needing space to work from home, a second bedroom may be central to the purchase. Buying a smaller flat can mean facing another move sooner than expected.
That makes the property cap more than a limit on how much buyers can spend. It can influence the type of home they choose and how long they are likely to stay there.
The government’s guidance sets a London household-income ceiling of £140,000. A professional couple earning £125,000 could therefore be below the income limit, yet find their preferred two-bedroom flat is above the local property cap.
Their choices then become more complicated. They could look at another area, accept less space, negotiate the price or explore a purchase without the equity loan.
The 32% figure is a snapshot of homes being marketed now. Asking prices and available stock can change before the scheme opens. Even so, it gives buyers a reason to test their intended search against actual listings before building their plans around government support.
A home just over the cap can create a much bigger funding gap
The financial difference can be far larger than the amount by which a property exceeds the limit.
Consider two outer London flats: one at £500,000 and another at £525,000. Assume the first meets the scheme’s other requirements and can be bought using the minimum 2.5% deposit and a 20% government equity loan.
For the second, assume a conventional mortgage covering 90% of the purchase price. The funding would look like this:
| Funding | £500,000 eligible purchase | £525,000 purchase above the cap |
|---|---|---|
| Buyer’s deposit | £12,500 | £52,500 |
| Government equity loan | £100,000 | £0 |
| Mortgage | £387,500 | £472,500 |
The property costs £25,000 more, but the buyer needs another £40,000 in cash and an £85,000 larger mortgage under these assumptions.
That is the real challenge for someone just outside the cap. The extra cost of the home is only part of the difference; the government loan also disappears from the funding.
A buyer cannot assume that paying the excess from savings brings an above-cap purchase into the scheme. The limit applies to the property’s purchase price.
Equally, the £100,000 equity loan in the first example remains a debt. Under the published terms it is interest-free for five years, and the amount repaid is linked to the home’s value. Comparing the two routes means looking beyond the initial cash deposit.
Conventional mortgages can reopen the property search
For buyers with enough savings and earnings, the main alternative is a mortgage outside Your First Home. That removes this scheme’s price caps and the requirement to buy from one of its participating developers.
It also gives buyers a chance to compare the new flat they want with existing homes in the same area. The question becomes what they can comfortably fund across that wider market.
New-build flats do, however, attract different deposit requirements between lenders. NatWest publishes lending up to 90% of value for eligible new-build residential flats, while Nationwide’s published maximum is 85%.
On a £525,000 flat, those percentages imply deposits of £52,500 and £78,750 respectively, assuming the valuation supports the price. The £26,250 difference shows why one bank’s answer need not settle the question of whether a purchase is possible.
These are maximum lending percentages, rather than offers to a particular buyer. Loan limits, income, the development and the lender’s valuation still shape the amount available.
The monthly comparison also needs to include the flat’s service charge and other running costs. A property that needs less cash at completion may still leave less room in the household budget each month.
Some buyers need more deposit; others need more borrowing
Those two problems need different answers. A couple with strong earnings but limited savings may be able to support the mortgage while falling short on the deposit. Another couple may have substantial savings but insufficient income for the required loan.
Where family help is available, a gifted deposit can reduce the cash shortfall and the mortgage needed. Santander’s published guidance, for example, accepts qualifying gifts from family or friends, with no repayment obligation or ownership interest for the donor.
In the £525,000 example, a buyer with £30,000 saved would need another £22,500 to reach a 10% deposit, before purchase costs. That establishes a specific gap to discuss, rather than treating the whole property as out of reach.
For business owners and professionals receiving bonuses, the borrowing side can be less straightforward. The headline household income may not be the amount every lender uses. Salary, dividends and variable earnings need to be assessed against the lender’s approach.
A larger deposit will not always solve a borrowing problem, and a higher income multiple will not supply missing cash. Understanding which constraint is holding up the purchase makes the alternatives much clearer.
A suitable first home may already have an owner
Your First Home is limited to new builds. Buyers considering conventional finance can also look at resale flats, where the same budget may offer a different balance of space, location and condition.
A second bedroom in an older building might matter more to one household than a newly fitted kitchen. Another may value a new home’s layout and lower initial maintenance demands enough to search further out.
These are choices about how the property will be used. A home that meets today’s needs but is likely to require another move quickly brings further selling, legal and moving costs into the picture.
Changing location also has a price beyond the purchase. Longer commutes, transport costs and distance from family support can affect the household’s budget. The useful comparison is between workable homes and their full costs, rather than between scheme eligibility labels.
Developers will need a plan for the homes above the caps
The findings also matter to developers and sales agents who expect the scheme to help clear new-build stock. Support for purchasers will be more useful on some units than others.
A development can contain homes on both sides of the limit. Buyers interested in a larger flat may need a conventional mortgage even if smaller properties in the same building are marketed to scheme users.
For units close to a cap, developers may weigh the commercial benefit of a genuine price reduction against holding out for an unsupported buyer. Any such decision would depend on the development’s margins, sales progress and participation costs.
Clear financing options could help sales teams retain enquiries that would otherwise stall when the price cap is mentioned. The conversation can then move to the buyer’s available deposit and borrowing position.
The property search needs to come before reliance on the scheme
Applications are expected from February 2027, with first sales under the programme from April. Buyers have time to compare both supported and conventional routes against homes they would actually want to own.
The new research shows why that comparison matters. An appealing minimum deposit means less if the available properties do not offer the space or location a household needs.
Willow can assess a buyer’s preferred property, available cash and income to establish whether conventional finance offers a practical alternative. For London buyers seeking a second bedroom, that could mean a wider search and a clearer decision about their first home.
Is the home you want above the scheme’s price cap?
Willow can compare your deposit and income with mortgage options outside Your First Home, so you can see whether the purchase works before changing your search.
Explore your mortgage optionsFrequently asked questions
Does the 32% figure mean those flats definitely qualify?
No. It measures currently marketed new two-bedroom London flats against the scheme’s price caps. The developer, buyer and purchase must also meet the programme’s requirements.
What are the Your First Home price caps in London?
The published caps are £650,000 in inner London and £500,000 in outer London. The government uses the London Plan 2021 definitions for these areas.
Can I pay the amount above the cap from my savings?
An above-cap purchase does not become eligible simply because the buyer funds the excess. The cap applies to the property’s purchase price.
Can I buy an excluded flat with a conventional mortgage?
Potentially. A conventional mortgage is not subject to Your First Home’s property-price caps, but the buyer must meet the lender’s deposit, affordability and property requirements.
When will Your First Home be available?
The published timetable expects customer applications from February 2027 and first property sales from April 2027.
About the author
Wesley Ranger is a director of Willow Private Finance. His work covers residential mortgages and specialist property finance, including first-time buyers, higher-value purchases and complex income.