Three major mortgage lenders launched new products today as part of the Government-backed scheme designed to boost demand for newly built homes.
The NewBuy scheme is forecast to help as many as 100,000 people locked out of the property market by heralding the return of 5% deposits rather than the 20% typically demanded by lenders since the credit crunch.
The Government will stump up 5.5% of the value of a mortgage on a home worth up to £500,000 in England, while the housebuilder will put up 3.5% to help guarantee mortgage lenders against any losses and stimulate a wave of fresh lending.
Barclays, Nationwide Building Society and NatWest Home Loans said they are ready to start lending under the scheme, while Santander aims to make products available by the middle of the year and Halifax is expected to follow suit.
The support of lenders is vital if the scheme is to succeed and there had been fears they would fail to put their weight behind it.
It is hoped the initiative will not only help buyers struggling to raise the deposit required for a new home but will also create new work - and jobs - in the construction industry.
Barratt Developments said the scheme is already proving popular and nearly 20,000 people have registered interest on its website.
Council of Mortgage Lenders director general Paul Smee said: "NewBuy will contribute not just to housing supply, but also to economic growth in the UK.
"And it will reopen access to many creditworthy borrowers to buying a new build property."
It today launched a guide to consumers on the new products.
Barclays said it will provide mortgages with a rate of 4.99% on up to 95% of a property's value, meaning a typical first-time buyer purchasing a new home with the participating builder at £180,000 and requiring a mortgage of £171,000 would pay £998.65 per month on a 25 year repayment basis.
John Cridland, director general of business body CBI, said: "Unfreezing the housing market will be a major game-changer in the drive for economic growth, which is why we called on the Government to support home buyers by making it possible for them to take out low-deposit mortgages.
"Spring is traditionally a great time for house buying, and I hope it won't be too long before home buyers benefit from the NewBuy scheme."
But Jonathan Samuels, chief executive of Dragonfly Property Finance, said the scheme "smacks of desperation".
He added: "The property market will come back when it is ready to come back and schemes like this are mere tinkering around the edges.
"If the Government thinks this scheme will kickstart the property market then it is in Cloud Cuckoo Land."