A scheme to inject life back into the housing market was mired in uncertainty today as lenders expressed reservations just days before it launches.
The NewBuy Guarantee scheme to help people buy a new-build home with a fraction of the usual deposit is set for launch next week but concerns have been raised that it is being rushed through in time for the Budget.
The Government initiative is part of a package of measures unveiled last year aimed at kick-starting the flagging housing market as well as boosting the construction industry.
It was initially intended to help the first-time buyer proportion of the market, which shrunk back to a three-year low last autumn, but the Government has widened the scheme to include home movers.
The plans would enable as many as 100,000 buyers to purchase a new-build home with a deposit of just 5% or 10% rather than the 20% typically demanded by lenders, and the initiative has been backed in principle by several banks.
But sources have suggested some lenders are not ready to start offering products and it was unclear how widely available they will be when the scheme launches next week.
Lenders' support is vital to the success of the scheme and fears have also been raised that high mortgage rates could put would-be buyers off the initiative.
The scheme is expected to launch on Monday, although the Department for Communities and Local Government (CLG) has not given details.
Those behind the initiative believe lenders will see it as less risky as it is backed by an insurance scheme contributed to by the building industry and Government.
Developers would contribute 3.5% of the purchase price while the Government guarantees 5.5%. The scheme is available on flats and houses up to a maximum value of £500,000 in England only.
But one banking source said some lenders needed time to get to grips with the idea.
"It's not a scheme that's going to change the housing market," the source said. "It's there to support house builders, not necessarily to support home buyers as a priority."
The source doubted that the scheme would help those with a poor credit history get on the property ladder as buyers would be subject to the same standard of checks as they are with mortgages generally.
Another banking source said those in the industry were not "terribly enthusiastic" about becoming involved in the scheme and said lenders were already looking at other ways to help people get on the property ladder.
The Financial Times reported earlier this week that a dispute has emerged over the price banks are prepared to charge for a 95% loan-to-value (LTV) mortgage.
It suggested that they are looking to charge 5% or more, but house builders believe this may put people off the scheme.
The scheme is also viewed by some as complicated, operating through a Guernsey-based insurer owned by the Home Builders Federation (HBF).
However, a spokesman for the Council of Mortgage Lenders (CML) expressed a more positive view, saying: "We are anticipating a number of lenders are working on plans to support the scheme. There is lender support and interest in the scheme.
"This is part of a wider approach to stimulating demand in the economy and it is part of a growth package and a series of measures."
The CML did not have examples of any immediate plans by lenders to make announcements relating to the scheme.
A Lloyds Banking Group spokeswoman said the banking giant is planning some products and more details would be announced soon.
She said: "We are still finalising the details of the products that will support the NewBuy initiative. We remain supportive of the scheme and look forward to sharing more detail next week."
A spokesman for HSBC, another lender which has backed the scheme, said: "We are supportive in principle but have no specific details on how we may be involved in NewBuy."
Barratt said 20,000 people have already registered with the home builder for more information about the scheme.
A spokesman for Barratt said the scheme had the potential to be "very significant" but added he did not know what rates lenders were planning to offer.
Housing Minister Grant Shapps recently said he has already identified enough Government land to build 80,000 homes and ministers are on course to release enough land for 100,000 homes by 2015.
He said he is in talks with the BBC, Network Rail and the Royal Mail in a drive to free up unused sites for housebuilding.
Mr Shapps recently said: "I'm pulling out all the stops for those who want to get on the property ladder, so from March the NewBuy Guarantee scheme will be on hand to help people buying newly-built properties with just a fraction of the deposit they would normally need."
The CLG said in a brief statement: "We are working closely with lenders and house builders to deliver the NewBuy Guarantee, which will enable people to buy newly-built homes with a much smaller deposit than currently required. The scheme will be launched next week."
An HBF spokesman insisted that lenders were behind the scheme, saying: "Lenders are on board and so are we."