The Budget on 28th October 2026 brought changes that could affect your deposit, homebuying options and household bills. Here’s what the Budget 2026 mortgage changes mean for you.
The main housing announcements were further details of the Your First Home scheme and a reduction in the Lifetime ISA withdrawal charge for qualifying purchases above £450,000. There was also support announced for household energy costs.
However there was no general reduction in residential stamp duty purchase rates or thresholds.
Whether you’re a first-time buyer, a home mover or reviewing your household budget, here’s what changed and what stayed the same.
Budget 2026 mortgage changes: what changed?
Your First Home: Buying with a deposit from 2.5%
Your First Home is a new government equity loan scheme for eligible first-time buyers purchasing participating new-build properties in England.
The announced funding structure combines:
- A deposit of at least 2.5%.
- A government equity loan worth 20% of the purchase price.
- A repayment mortgage covering the remaining amount.
For a £300,000 property, the figures could look like this:
The announced household income limits are £110,000 outside London and £140,000 in London. Local property price caps will apply, and the property must be offered by a participating developer.
Applications are expected to open in February 2027, with the first purchases expected from April 2027.
It’s an equity loan, so the repayment amount can change
The smaller deposit could help some buyers get started, but the government contribution is a loan that must be repaid.
The equity loan is linked to your property’s value. If you borrow 20%, you will normally repay 20% of your home’s value when you clear the loan.
For example:
The equity loan is interest-free for five years. Interest then applies at 1.5% in year six and 3% from year seven.
There is no scheduled monthly capital repayment on the equity loan. However, the interest payments that begin after five years do not reduce the outstanding balance. Your normal mortgage repayments are separate.
You will be able to repay some or all of the equity loan before selling, but full details about minimum repayments, valuations, fees and remortgaging are still to follow.
Lifetime ISA: retaining more of your savings above £450,000
From 29th October 2026, the Lifetime ISA withdrawal charge falls from 25% to 20% where the funds are used for an otherwise qualifying first-home purchase costing more than £450,000.
Previously the 25% charge took back the government bonus and part of your own contributions. The reduced charge removes that additional penalty.
For example, suppose you have saved £20,000 into your Lifetime ISA and received £5,000 in government bonuses:
That gives you £1,250 more towards your purchase, assuming no interest or investment growth.
The charge applies to the LISA money withdrawn. It is not calculated on the property price or just the amount above £450,000.
Other unauthorised withdrawals remain subject to the 25% charge.
Gas standing charges: removal planned
The government has asked Ofgem to remove domestic gas standing charges in Great Britain, aiming for delivery by the end of 2027 or as soon as possible afterwards.
A standing charge is the fixed daily amount you pay regardless of how much gas you use.
However, the underlying costs will move into gas unit rates. This means removing standing charges will not automatically save every household the full amount it currently pays.
Lower gas users are more likely to benefit, while the effect on other households will depend on consumption and the final arrangements. Further protection for some households is due to be announced.
Read the government’s explanation of what the Budget means for energy bills.
£100 payment for households in council tax bands A–D
A £100 Household Energy Payment has been announced for households in council tax bands A–D in England, with delivery through local authorities from January 2027.
This is help towards energy costs, rather than a permanent reduction in council tax.
Additional discretionary funding will be available for councils to support some households outside those bands. Scotland, Wales and Northern Ireland will receive funding for their governments to decide how to provide comparable support.
What didn’t change?
No general stamp duty reduction for homebuyers
The Budget did not introduce a general reduction in residential stamp duty purchase rates or thresholds.
For eligible first-time buyers purchasing in England or Northern Ireland:
- No Stamp Duty Land Tax applies to the first £300,000.
- 5% applies to the portion between £300,000 and £500,000.
- If the purchase price exceeds £500,000, first-time buyer relief is unavailable.
For example, an eligible first-time buyer purchasing for £400,000 would still pay £5,000 in stamp duty.
For buyers who do not qualify for first-time buyer relief, the standard residential nil-rate threshold remains £125,000. Additional surcharges can apply depending on the circumstances.
You can read my stamp duty guide for worked examples, or check the official GOV.UK residential stamp duty rates.
The Lifetime ISA property cap remains £450,000
The reduced withdrawal charge has not increased the property price limit for retaining the government bonus.
For an otherwise qualifying purchase costing £450,000 or less, you can still use the bonus. Above that limit, the new 20% charge applies.
The benefit is that buyers crossing the cap retain more of their own money than under the previous rules. They do not keep the government bonus on the money withdrawn for that purchase.
This distinction matters when working out your deposit. Always check what your LISA provider will release before relying on the full account balance.
Lifetime ISA contribution limits remain the same
You can still contribute up to £4,000 per tax year, with a government bonus of 25%, up to £1,000 annually.
The £4,000 contribution counts towards your overall annual ISA allowance. You must make your first LISA payment before age 40 and can continue contributing until age 50.
For example, contributing £4,000 in each of ten eligible tax years would give you £40,000 of contributions and £10,000 in bonuses, before interest or investment returns.
For information about the wider annual allowance, see the government’s Individual Savings Accounts guidance.
Mortgage affordability checks still apply
Access to a government scheme does not guarantee mortgage approval.
Your First Home buyers will still need a repayment mortgage from a participating lender, subject to affordability and credit checks.
Your income, existing commitments, credit history and the property will still affect the options available.
Getting mortgage advice before reserving a property can help you understand your budget and identify anything that needs addressing.
Your deposit is still only part of the cost
A smaller deposit requirement does not remove the other costs of buying and owning a home.
You should still allow for:
- Stamp duty, where applicable.
- Solicitor and conveyancing costs.
- Surveys and mortgage fees.
- Moving expenses.
- Insurance, maintenance and repairs.
- Service charges or estate charges, where applicable.
You can use my mortgage calculator for an initial indication of repayments, then arrange an appointment to review your circumstances properly.
What do the Budget 2026 mortgage changes mean for you?
The 2026 Budget included mortgage changes that could help some buyers with their deposit, but understanding the eligibility rules and overall costs remains essential. The announcements could help some buyers purchase with a smaller deposit or retain more of their Lifetime ISA savings. The household energy measures may also provide some support with running costs.
The right approach still depends on your circumstances, the property you want to buy and what you can comfortably afford.
I provide whole-of-market mortgage advice across Romford, Hornchurch, Upminster, Brentwood and throughout Essex, with phone and Teams appointments available for buyers elsewhere in the UK.
Whether you’re buying your first home or planning your next move, I can review your deposit, borrowing options and likely monthly costs before you commit.
CLICK HERE: And book an appointment today
Understand your mortgage options, borrowing potential and the costs involved before making an offer.
Based in Romford, I provide whole-of-market mortgage advice to buyers across Essex and throughout the UK, with clear, personal guidance from your first enquiry through to completion. I provide mortgage advice through Clarity Wealth Management LLP, which is authorised and regulated by the Financial Conduct Authority. FCA registration number: 575252.
- Information checked on 29th October 2026. Tax rules can change. This is general information, not personalised tax advice. Your solicitor or tax adviser should confirm your liability.
Your home may be repossessed if you do not keep up repayments on your mortgage.
