A new government-backed scheme will guarantee lenders against their losses if certain borrowers fail to repay their loans.
The aim is to encourage lenders to offer mortgages to up to 100,000 potential buyers of newly-built properties who have only a 5% deposit, rather than the 20% deposit most lenders currently require.
It is hoped this will encourage more housing to be built and boost levels of home ownership.
At the moment lenders are reluctant to lend to these people because they fear that house prices may fall, borrowers jobs are insecure and their earnings prospects look too poor to make them a reasonable risk. If the borrower defaulted, the lender would be exposed to losses if after the home was repossessed, it was sold for less than the value of the outstanding loan.
In addition, under international banking rules, lenders have to put aside a much larger financial cushion in their reserves if they lend with a small deposit rather than a large one.
Under the new scheme, if the lender, house builder and you all agree, you can now get a 95% loan.
That is because in addition to your 5% deposit, if the price of the property falls below the 95% loan the lender will be able to reclaim 95% of any losses it incurs.
Although details have yet to be finalised, it should work like this:
The house builder or developer of the new home will pay a sum equivalent of 3.5% of the selling price of the home to the lender, which will be held for seven years.
The developer will receive interest during that time, before the 3.5% is handed back to it. In addition, the government is agreeing to guarantee a further 5.5% of the sale price against loss by the lender.
In effect 9% of the sale price will be in an insurance pot. Under the terms of the scheme, the lender will have insurance for 95% of its loss if the borrower defaults.
The scheme applies to England only. Similar schemes are being considered for Scotland and Wales.
In the past it was the borrowers who paid the premium for a Mortgage Indemnity Guarantee - an insurance policy - if they wanted a mortgage for more than 95% of a property's value.
This industry practice largely disappeared because people objected to paying an insurance premium that benefited only the lender and because then, house prices were rising so fast lenders were less concerned about borrowers defaulting.
If the borrower defaults, they are still liable for the loan as before.