Andy Burnham has announced a new scheme that could allow first-time buyers to purchase a home with a deposit of just 2.5%, as part of plans to help more young people onto the property ladder.
The Your First Home scheme is aimed at people with a regular income who have struggled to save a large deposit or cannot rely on the “bank of mum and dad”. Under the plans, eligible buyers purchasing a new-build home would receive a government-backed equity loan worth 20% of its value, with an initial interest-free period. Further details are due at next week’s Budget.
The announcement could bring homeownership within reach for people who previously thought buying was still years away. It comes as first-time buyers play an increasingly important role in the market, accounting for over half (52.8%) of UK mortgage sales in 2025, up from 33.8% in 2006.
However, first-time buyers are also borrowing more heavily. The typical loan-to-value ratio reached 85.6% last year, its highest level since before the financial crisis.
And while the new scheme could help more people overcome the deposit barrier, buyers would still need to qualify for a mortgage. Lenders may consider whether applicants can afford the repayments alongside their existing borrowing and outgoings, as well as their payment history and the information recorded on their credit reports.
With the scheme potentially prompting more aspiring homeowners to bring forward their plans, Mel Whiting, Head of Mortgages at Norton Finance, is urging buyers to prepare their credit profiles alongside their deposits.
Seven ways to improve your credit score before applying for a mortgage
Avoid taking on new borrowing before you apply
Mel says: “If you are planning to apply for a mortgage, think carefully before making several applications for new credit over a short period.
“Formal applications usually involve hard searches, which are recorded on your credit report and may be considered by lenders. Eligibility checks generally use soft searches, which won’t affect your credit score in the same way.
“Lenders will also assess wider borrowing commitments. Buy Now, Pay Later products such as Klarna, credit cards and other finance agreements can form part of the affordability picture, so avoid unnecessary borrowing and consider using an eligibility checker first.”
Make every payment count
“A single late payment can remain visible to lenders for six years, which could seriously harm your credit application.
“Ensure all your direct debits, finance, and credit card payments are up to date, including mobile phone contracts, utility bills, and car finance arrangements.
“Keeping payments up to date can help demonstrate a consistent repayment history to lenders and contribute positively to your credit profile.”
Reduce your credit card balances
“Just because you have the credit available doesn’t mean you should use it.
“Many people have lower credit scores because they’re using too much of their available credit. As a general guideline, try to keep credit utilisation below 30% of your available credit, but between 10-20% can be ideal. It’s equally important to ensure any balances are paid on time.
“This is particularly important when you have multiple credit accounts – aiming to use less than 30% of your available credit may help strengthen your credit score.”
Check your credit report before lenders do
“You’d be surprised how often people discover outdated or simple errors on their credit report that contribute negatively towards their credit score.
“Old addresses, closed accounts showing as active, and incorrect missed-payment markers could present lenders with an inaccurate picture of your credit history.
“Check the information currently held by TransUnion, Experian, and Equifax, and ask for any inaccuracies to be corrected before submitting a mortgage application.”
Register on the electoral roll
“Registering to vote at your current address can help contribute positively towards your credit report.
“Often overlooked by younger renters who spend shorter terms in properties, they’re used to verify applications by confirming your identity and address as the correct one.
“While joining the electoral register can help strengthen your credit profile, lenders often prefer to see a stable address history, so it can take time before the full benefit shows on your credit report.”
Check you’re not still financially linked to an ex-partner
“Lenders may assess risk linked to certain individuals, which is why it’s important to review any previous joint bank accounts before applying for a mortgage.
“It’s not uncommon for people to assume a relationship ending automatically removes all financial ties, but that’s not always the case.
“If you know that you’re still linked through a joint account or credit agreement, it’s worth checking how this could affect a future mortgage application.”
Use the ‘snowball method’ to tackle credit card debt
“If you are managing several card balances, the snowball method is one approach that may help you reduce your debts before applying for a mortgage.
“Begin by writing down all your debts and ensure you’re paying the minimum on all balances regardless of the interest rates. Aim to clear the smallest debt first, then roll or ‘snowball’ the repayments for the cleared debt onto the next debt.
“Clearing a debt creates a quick psychological boost, while rolling the repayments over will create momentum to clear debt while encouraging overall debt reduction.”
Mel Whiting added: “The new scheme could make the deposit needed for a first home feel far more achievable, particularly for people who cannot rely on financial support from their family.
“For people who thought buying was still years away, this announcement may bring their plans forward. That makes it important to check your credit profile now, rather than discovering an error, missed payment or forgotten financial link when you are ready to apply.
“There is no single action or credit score that guarantees mortgage approval, but addressing potential problems early could place buyers in a stronger position when lenders assess their application.”
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Feature image by PixelVista on iStock
