The ambitious NewBuy scheme, launched today, could see buyers borrowing up to 95% of the value of their property as a government backed mortgage.
Under the proposals buyers could secure a new-build property with just 5% of the value of the property as a deposit. The mortgage loans will be backed by a combination of the firm that built the property and the government, in a bid to make lenders more comfortable with offering larger mortgage loans.
In the current market buyers typically require a 20-25% deposit in order to be considered for a mortgage loan.
The new scheme is open to both first time buyers and movers provided they are UK citizens and they are purchasing the property as their main home.
The government hopes that the scheme will make properties more affordable, potentially aiding up to 100,000 buyers who are currently locked out of the property market. It is also hoped that the plans will support an estimated 50,000 jobs in the construction and related industries as a result of increased demand for newly built homes.
Three major banks, and seven major building firms have already signed up to the scheme which was unveiled today by Prime Minister David Cameron and Housing Minister Grant Shapps earlier today.
Mr Shapps said:
"This Government inherited a housing market in disarray, with millions of hard working people blocked from taking their first step on the housing ladder - their desire to buy a home no longer a dream, but a distant fantasy.
"We want to help everyone achieve their aspirations, and feel the pride of home ownership. So I'm delighted that from today the NewBuy Guarantee will give thousands of prospective buyers the chance to buy a home with a fraction of the deposit normally required."
Council of Mortgage Lenders director general Paul Smee Said:
"We are delighted that three lenders are today launching mortgages under NewBuy, and that more are set to follow. These mortgages will help creditworthy borrowers who simply haven't yet managed to build up a large enough deposit to gain access to finance to buy a newly built home.
"NewBuy is good news for home-buyers, and potentially good news for jobs and the wider economy too. Borrowers need to understand the implications of high loan-to-value borrowing, so we are pleased to support the initiative with clear consumer information to help people decide whether NewBuy borrowing is an attractive option for them."