First-time buyers with small deposits will get a leg up onto the property ladder with a mortgage guarantee scheme in next week’s Budget.
Rishi Sunak plans to incentivise lenders to provide mortages to first-time buyers and current homeowners, with just 5 per cent deposits to buy properties worth up to £600,000.
The chancellor will set out on Wednesday how the government will offer lenders the guarantee they require to provide mortgages covering the remaining 95 per cent.
The Treasury said low-deposit mortgages have "virtually disappeared" because of the economic impacts of the coronavirus pandemic.
The prime minister, Boris Johnson, said: "I want generation rent to become generation buy and these 95 per cent mortgage guarantees help to deliver this promise.
"Young people shouldn't feel excluded from the chance of owning their own home and now it will be easier than ever to get onto the property ladder."
The scheme, which will be subject to the usual affordability checks, will be available to lenders from April.
It is based on the Help to Buy mortgage guarantee scheme introduced in 2013 by David Cameron and George Osborne, that ran until June 2017.
Aiming to reinvigorate the market following the 2008 financial crisis, that scheme was said to have helped more than 100,000 households buy a home across the UK.
Mr Sunak said: "Owning a home is a dream for millions across the UK and we want to help as many people as possible.
“Saving up for a big deposit can often be difficult, and the pandemic has meant there are fewer low deposit mortgages available."
Labour’s shadow housing secretary Thangam Debbonaire said: “Home ownership has fallen in the decade the Conservatives spent weakening the foundations of our economy.
“If the chancellor wants to help young people get on, he should deliver a Budget with a relentless focus on jobs and growth.
“What young people need to get on is the secure future that comes with a decent job and genuinely affordable new houses to be built for them to make homes of, not going back to the days of sky-high mortgages.”
Additional reporting by PA