The government said it will join forces with the country's house builders in offering special indemnity insurance to the UK's mortgage lenders. In return, lenders must provide 95% loan to value (LTV) mortgages to up to 100,000 potential buyers of newly-built properties.
This will ensure that, if there is a double dip in the housing market and these homes end up being worth less than the mortgages on them, the lenders will be able to recover their losses.
Lenders have been ultra-cautious about 95% mortgages since the credit crunch hit in 2007, and, those that have made them available have put in entry hurdles (such as a squeaky clean credit rating), which make them out of reach for the vast majority of people.
Lenders that have provisionally agreed to the new scheme, which will see the first mortgages introduced in spring next 2012, include Barclays, HSBC, Lloyds Banking Group, Nationwide, RBS, Santander and Yorkshire and Clydesdale banks.
But buyers will still have to meet each lender's borrowing criteria. This means having an adequate salary to support the loan and passing the lender's own credit scoring system.
Look to lenders already offering 95% deals
For first-timers unwilling to wait until the spring in the hope the scheme pays off for them, there are other ways to get on the housing ladder.
If you know your credit score is good, look at some of the lenders who are already offering 95% mortgage deals. These include Clydesdale and Yorkshire banks, Skipton, Melton Mowbray, Ipswich, Saffron, Shepshed and Mansfield building societies.
Rates on these deals are a lot more expensive than you would pay with a bigger deposit but some are still reasonably competitive. Yorkshire bank for example, is offering a three-year fixed rate at 95%, priced at 6.19% with a reasonable £599 fee.
Save more pay less
If you can raise a 10% deposit or even more, however, you will benefit from much lower mortgage rates. And of course, you won't have to borrow so much in the first place which means less to pay back overall.
What's more, 90% mortgages are becoming increasingly competitive. This week, for example, HSBC announced the launch of its first ever 'sub-4%' mortgage for borrowers with a 10% deposit.
The deal is a two-year discounted mortgage which is currently priced at 3.84% and comes with no set-up fees. But borrowers should note that the cost is directly linked to the bank's standard variable rate which went up recently to 3.94% and could easily rise again.
Cash-strapped first-time buyers should therefore think carefully whether they would be able to afford an increase in their monthly mortgage payments.
If you wouldn't be able to, the only sensible option is a fixed rate mortgage which will ensure your repayments don't change. For a 10% deposit, HSBC is offering a fixed rate of 4.49% for two years with no arrangement fee.
The good news for first-time buyers is that the cost of property is actually falling according to some national indices, meaning that the deposits required are shrinking too.
Figures this week from Rightmove.co.uk for example, show the average asking price tumbled in November by 3.1% on the previous month - the largest fall since December 2007.
Ask your family for help
With some specialist mortgages, you can benefit from rates that would apply to 75% deals but still only need to raise a 5% deposit. The lender gets its security from someone else who is willing to help you instead.
With Lloyds TSB's Lend a Hand Mortgage for example, you only need a 5% cash deposit but your 'helper' will need to keep savings of 20% of the property value with the bank.
This cash - which still earns interest - will be used as security for what is effectively a 75% loan to value mortgage, and will come with rates to match.
Lloyds' Lend a Hand deal is available on a three-year fixed rate basis priced at 4.3% with a £895 fee.
Shared equity
In the absence of a willing party with savings, you could also opt to share the cost of the deposit with the government and participating property developer under the FirstBuy Direct scheme.
Introduced in the 2011 Budget, the scheme requires that first-timers only need to put down a deposit of 5% of the property value, taking an additional 20% as an equity loan which is stumped up in equal measure by the government and a local property developer.
As well as an equity loan which is interest-free for five years, first-timers benefit from mortgage rates that apply to a 75% mortgage, which makes things a lot easier on their pocket.
Participating lenders include Halifax, Nationwide and Woolwich. Bear in mind however, that when the house is sold, the loan will have to be paid back at the same percentage. So if you have made a profit, you will have to surrender the relative proportion.
Clock ticking on Stamp Duty
While rushing onto the property ladder is in no first-time buyer's interest, those that leave the starting blocks before next spring will also benefit from the government's waiver of stamp duty for all homes priced under £250,000. This concession expires on 24 March 2012.
Please note: Any rates or deals mentioned in this article were available at the time of writing.
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