"I have an illness, a disease with the shape and sound of a snake. Whenever I learn something new, it learns it too … My illness knows everything I know. This was a difficult thing to get my head around." Matt Homes, a 19-year-old schizophrenic struggling within the mental health system, is conducting his own writing therapy, urgently bashing out his thoughts on an old typewriter and interspersing them with letters, doodles and sketches. The Shock of the Fall, which has just won the Costa prize for best first novel, is beautifully packaged, with drawings, varying typefaces and typographical tricks representing Matt's swelling bundle of papers. It is a gripping, exhilarating read.

Sectioned after failing to cope in the community, Matt is fully aware of how intimidating he can seem to others, with his gawky height and army-camouflage gear, strange behaviour and internal voices. "Matthew … suffers from command hallucinations, which he attributes to a dead sibling. Crazy shit, eh?" he writes, spoofing his own medical notes.

The dead sibling is Simon, his older brother with Downs syndrome, who died during a family camping holiday when they were both children. Matt presents the fact – "the shock of the fall" is what killed Simon – right at the start, but it is not until towards the end that we fully discover the circumstances for which Matt feels unending guilt. The device of delayed revelation can seem artificial and annoying in clumsier hands, but here it is effective. Matt's voice – puzzled, resolute and frank – is dazzlingly rendered, and his descriptions of life on a secure ward are fascinating.

He draws attention to flaws in his narrative and at times addresses the reader directly: "I can only describe reality as I know it. I'm doing my best, and promise to keep trying." Endeavouring to be honest, he circles around painful memories, trying to get a purchase on them. All the while, he is aware both of the limitations of memory and of memoir, and the professional suspicion surrounding all activities of the mentally ill. He mocks the excesses of psychiatric jargon: "Patient is engaging in writing behaviour." "Between you and me, I might take a shit in a bit. Is that engaging in shitting behaviour?"

Caustic and funny observations take the sting out of a grim prognosis. "This illness has a work ethic," Matt notes when his obsessions get the better of him. Life on the ward follows the same boring pattern, day after day. "Repetitive, aren't I? I live a Cut & Paste kind of life." He is particularly fed up with all the promotional ware lying around. "Last time I went into the office to borrow the Nursing Dictionary, I counted three mugs, a mouse mat, a bunch of pens, two Post-It note booklets and the wall clock – all sporting the brands of different medicines. It's like being in prison and having to look at adverts for fucking locks." Life on the ward is gruelling in its tedium, as a sample hour-by-hour guide demonstrates. The indignation of Filer, a registered mental health nurse, resounds behind Matt's repeated complaint: "There is literally nothing to do."

Memorable characters are woven through the narrative, such as Matt's kindly but shattered parents and his redoubtable grandmother, Nanny Noo. Even a walk-on part is sharply delineated: annoying Aunt Jacqueline "dresses all in black and talks too much about magic and spirits, and will never not smoke, even at children's parties". Can't you just see her?

Shackled to an unredeemable act, Matt grapples with his past in passages that have a sort of simple poetry: "In life there are milestones … like the day we uttered our first proper word and the day we took our first steps. We made it through the night without a nappy. We learnt other people have feelings, and the stabilisers came off our bikes."

Although events take on a nightmarish tinge when dead Simon begins to hide under his hospital bed, losing the hallucinations means losing his brother all over again. Matt is heroic in his fortitude and resilience. He has a cruel disease but, as Filer shows, it doesn't have to crush the human spirit.