Banking giant Santander announced today it was slashing the deposits it demands from first-time buyers purchasing new-build properties.
The UK's second biggest mortgage lender is increasing the maximum amount it will lend to first-time buyers purchasing a new apartment from 70 per cent to 80 per cent.
Those buying a new build house can now borrow up to 90 per cent of their property's value, up from 80 per cent previously - halving the size of the deposit they need.
It is the first time that Santander, formerly Abbey, has lent up to 90 per cent on a new property since March 2008.
The move is a further sign that lenders are becoming increasingly confident about the prospects for the housing market, particularly new build properties.
Many lenders demanded higher deposits on new homes than on older housing stock during the property market correction, which saw up to 50 per cent knocked off the value of some city centre flats.
The new loan-to-value ratios only apply to first-time buyers, with other borrowers still needing deposits of 30 per cent for a flat and 20 per cent for a house.
The deal for first-time buyers is also only available on two mortgage products, a two-year tracker of 4.99 per cent with a £995 fee, and a three-year fixed rate loan of 5.99 per cent with a £495 fee.
Phil Cliff, mortgage director at Santander, said: "We have seen confidence return to this segment of the property market and by increasing the maximum LTV (loan to value) on new build mortgages we are able to offer prudent first-time buyers more choice and flexibility."
Ray Boulger, senior technical manager at independent mortgage advisor John Charcol, welcomed the move and predicted other lenders would now follow suit.
He said: "For about three years now there have been restrictions from many lenders on the maximum loan-to-value rations they will do on new build properties, particularly flats.
"Having one of the major lenders in the market go back into higher end LTV loans on new build properties means other lenders will follow suit."
But he added that the move was "long overdue".
There has been a significant improvement in the options available to first-time buyers in recent months.
Research from MoneyExpert.com showed that the number of lenders offering fixed rate loans to people with only a 10 per cent deposit has nearly doubled during the past 12 months, while the number of individual products available has risen by 88 per cent to 147.
Figures from financial information group Moneyfacts also show that there has been a 38 per cent increase in all deals for people borrowing up to 90 per cent of their home's value since the beginning of the year.
Pierre Williams, head of research at MoneyExpert.com, said: "For those looking to borrow a sizeable percentage of the value of their home this is clearly good news.
"Lenders have been risk averse in the past year and have shied away from high LTVs. Measured optimism over the housing market, though, seems to be encouraging higher value lending."
But borrowers with only a 10 per cent deposit can still expect to pay considerably higher interest rates than those with more money to put down.
The average interest rate charged on all fixed rate mortgages is currently 5.4 per cent, but the average rate for people borrowing 90 per cent of their home's value is 6.3 per cent.
Meanwhile, separate research showed that building societies are continuing to hold their own against banks, offering nearly half of all best-buy products.
The mutual sector offers 24 out of the 50 most competitive mortgage rates on loans with LTVs of 60 per cent, 75 per cent, 80 per cent, 85 per cent and 90 per cent, according to website realpricecomparison.com.
Building societies were particularly strong on products for people borrowing between 75 per cent and 90 per cent of their home's value, accounting for 60 per cent of best-buy deals, including offering eight out of 10 leading mortgages for people with just a 15 per cent deposit.