Mortgage brokers could face difficult conversations with first-time buyers over the government’s proposed Your First Home scheme, amid concerns that smaller deposits and inflated new-build property prices could leave homeowners vulnerable to negative equity.
The scheme, announced in September 2026, is designed to help first-time buyers in England purchase newly built properties with deposits as small as 2.5%, supported by a 20% government-backed equity loan.
While the initiative could make saving for a deposit significantly easier, research from mortgage specialist Tembo suggests it could also expose buyers to considerable financial risks.
According to Tembo’s First-Time Buyer Index Q3 2026, reducing the minimum deposit to 2.5% could cut the time needed to save for a home by more than a year in some English cities.
However, the research also found that new-build homes were more expensive than comparable existing properties in 10 of the 17 cities analysed.
Across those cities, the average first-time buyer new-build property was valued at £236,750, compared with £226,941 for an existing property, a premium of approximately 4.3%.
This raises questions about whether government support could encourage buyers to pay more for properties that may not retain their value.
Speaking at an industry breakfast attended by Good Money Guide, Tembo founder and CEO Richard Dana was asked whether mortgage brokers should be responsible for warning buyers about these risks.
The journalist highlighted that the economic environment was considerably different from the period when Help to Buy operated, when rising property prices made it easier for buyers to refinance and repay their government equity loans.
Dana acknowledged the risks and said Tembo regularly discussed the longer-term financial implications of property purchases with its customers.
He explained that although assessing whether a property represents a good investment is not necessarily a broker’s regulatory responsibility, Tembo wants customers to build wealth through homeownership rather than lose money.
He was particularly concerned about new-build flats in London, where weak property prices and expensive service charges could make properties difficult to resell.
Service charges were an often-overlooked issue, he said, particularly where contracts allowed charges to increase substantially over time.
Tembo’s research illustrates the potential dangers of buying with very little equity.
Its modelling compares two 28-year-old first-time buyers purchasing homes with different deposit sizes. The analysis found that a buyer using the Your First Home scheme could have £3,996 less equity after one year, £4,785 less after three years and £6,363 less after five years than a buyer using a conventional 5% deposit.
The report also found that lower-income buyers could still struggle to qualify for mortgages even with government assistance.
In 13 of the 17 cities analysed, lower-income households would need to borrow more than 4.5 times their annual income to purchase an average first-time buyer property using the scheme.
Dana questioned whether brokers tied closely to new-build developers would be as willing to challenge buyers about the suitability of a purchase as independent advisers.
He said Tembo was in a stronger position to raise concerns because it was not commercially aligned with particular housing developments.
Although he did not expect regulators to introduce a specific requirement for brokers to warn about potential property price losses, he believed advisers should have frank conversations with buyers about valuations, affordability and resale risks.
For first-time buyers, the central lesson is that being able to purchase a property with a smaller deposit does not necessarily make it affordable or a good investment.
Richard is the founder of the Good Money Guide (formerly Good Broker Guide), one of the original investment comparison sites established in 2015. With a career spanning two decades as a broker, he brings extensive expertise and knowledge to the financial landscape.
Having worked as a broker at Investors Intelligence and a multi-asset derivatives broker at MF Global (Man Financial), Richard has acquired substantial experience in the industry. His career began as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson), following internships on the NYMEX oil trading floor in New York and London IPE in 2001 and 2000.
Richard’s contributions and expertise have been recognized by respected publications such as The Sunday Times, BusinessInsider, Yahoo Finance, BusinessNews.org.uk, Master Investor, Wealth Briefing, iNews, and The FT, among many others.
Under Richard’s leadership, the Good Money Guide has evolved into a valuable destination for comprehensive information and expert guidance, specialising in trading, investment, and currency exchange. His commitment to delivering high-quality insights has solidified the Good Money Guide’s standing as a well-respected resource for both customers and industry colleagues.
