High Street lenders are now beginning to offer mortgages to borrowers offering a deposit of just 5% under a replacement government guarantee scheme.
The policy, announced in the Budget, is designed to help more first-time buyers secure a home.
But the launch comes as average house prices within the UK still rise to record levels.
Analysts also suggest that cheaper deals are available for those able to stretch to a 10% deposit.
The scheme is analogous to policies previously wont to boost the housing market and therefore the economy, also as offering support to those buying a home for the primary time.
The new scheme will be available to anyone buying a home costing up to £600,000 unless they are buy-to-let or second homes.
The government is offering a partial guarantee, generally of 15%, to compensate lenders if the borrower defaults on repayments.
The guarantee is designed to give lenders the confidence to offer 95% loan-to-value mortgages – many of which were withdrawn during the Covid crisis.
Lloyds, Santander, Barclays, HSBC, and NatWest are beginning to offer products in the week and Virgin Money will do so next month.
However, some lenders such as Halifax, which is part of Lloyds Banking Group, and Barclays have said that these products will not be available for new-build properties.
Chancellor Rishi Sunak said: “Every new homeowner and mover supports jobs right across the housing sector, but saving for an enormous enough deposit is often hard, especially for first-time buyers.
“By giving lenders the option of a government guarantee on 95% mortgages, many more products will become available, boosting the sector, creating new jobs, and helping people achieve their dream of owning their own home.”
However, lenders will still carry out affordability checks. Anyone who has lost a job, or whose income has been sporadic owing to the pandemic’s effect on employment may find it difficult to secure a mortgage.
House prices have been rising – partly because of government stimulus, and there are concerns too about the potential for some to fall into negative equity if this is followed by sharp falls in property values.