For the first time, buyers will be able to climb the property ladder under a new mortgage guarantee scheme.
The plan, which is expected to be announced during the budget, will allow young people to obtain a mortgage with a deposit of just 5 percent of the value of a property.
According to plans to be established by Chancellor Rishi Sunak, the scheme will try to transform the “rent of the generation” into “purchase of the generation”.
Tens of thousands of young people will have part of the loans guaranteed by the Treasury in an attempt to encourage banks to offer riskier mortgages on homes worth up to £ 600,000.
Most banks stopped offering mortgages for 95% of the loan amount at the beginning of last year because of the coronavirus pandemic.
Some have started offering 90 percent in the past few months, but there are strict rules and very limited availability.
Prime Minister Boris Johnson said: “I want the rental of the generation to become a purchase of the generation and these 95% mortgage guarantees help to keep that promise.
“Young people should not feel left out of the chance to own their own home and it will now be easier than ever to climb the property ladder.”
Chancellor of the Treasury, Rishi Sunak said: “Having a home is a dream for millions across the UK and we want to help as many people as possible.
“Saving for a large deposit can often be difficult, and the pandemic has meant that fewer low-deposit mortgages are available.
“Thus, by giving creditors the option of a 95% government guarantee on mortgages, many more products will be available, helping people to realize their dreams and climb the housing ladder.”
Creditors fear that house prices could fall and the job losses caused by Covid could push buyers into negative equity.
The new scheme is expected to have a major impact on the housing market and has been discussing details with creditors for weeks, according to The Times.
It is understood that the project will replace the Help to Buy scheme created in 2013, which lasted until 2017.
Prime Minister Boris Johnson praised the measure in October, saying he wanted to resolve the “generation rent” problem.