The government is expected to allow households earning up to £110,000 to apply for its new loan scheme to help first-time buyers in England.

As first reported by The Times, external, a higher earnings limit of £140,000 is expected to apply to those purchasing properties in London.

The Your First Home scheme will offer government-backed equity loans worth 20% of new-build properties purchased from participating developers.

The loans, which will also be subject to an initial interest-free period, are designed to help people buy a home with deposits as low as 2.5%.

Previous schemes to help first-time buyers did not restrict eligibility by income but faced criticism for stoking house prices by allowing relatively wealthy households to borrow more.

Unveiling the Your First Home Scheme at last month’s Labour conference, Prime Minister Andy Burnham said it would focus on those who “really need support”.

Details of the changes, including salary caps, are due to be confirmed at next week’s Budget.

The Times reported that ministers had initially decided to set the earnings limits at £90,000 for homes outside outside London and £110,000 in the capital, before concluding this would deny access to too many middle-earning couples, such as teachers and nurses.

The government has also argued that the scheme will help to boost housebuilding, after ministers conceded they are set to miss a target to build 1.5 million homes in England by the next election.

Labour has said the scheme will be funded by within existing government budgets, but is yet to provide details of which other areas will see their spending cut.

Developers taking part in the scheme will also be asked to contribute towards running costs.

Like the Help to Buy scheme launched under the Conservative-Liberal Democrat coalition government, the scheme will use equity loans, which are linked to changes in the value of properties they are used to purchase.

That scheme, which initially ran between 2013 and 2021, enabled all home purchasers to put down a 5% deposit on a newly built home worth up to £600,000.

Up to 20% of the cost of the home was funded by a shared equity loan, which was interest-free for the first five years.

A second version of that scheme, which ran from 2021 to 2023, restricted access to first-time buyers and applied regional-level price caps to the properties could be bought under the programme.