The scheme is aimed at enabling 100,000 buyers to buy a new home and is hoped to boost housing construction, creating 50,000 new jobs on sites throughout England.
Banks will now be protected against losses if they offer mortgages to buyers with only a 5% deposit who are buying new-build houses worth up to £500,000.
Three high street lenders – Barclays, Nationwide Building Society and NatWest Home Loans – have stepped forward to offer 95% mortgages to buyers of new-build homes.
So far only seven of the major house builders have managed to navigate the legal procedures to put the NewBuy mortgage in place.
Other leading names, including smaller house builders, are expected to follow their lead in the coming weeks and months.
David Cameron also highlighted plans to separately offer two million council tenants subsidies of up to £75,000 in the biggest extension of Margaret Thatcher’s flagship right-to-buy policy for decades.
For every home sold, the Government pledges to build a new ‘affordable’ home.
The Prime Minister said: “Strong families and stable communities are built from good homes. That’s why I want us to build more homes and I want more people to have the chance to own their own home.
“We are acting today across the board to make this happen.
“We’re re-booting the right to buy scheme to increase discounts for two million tenants in social housing in England.
“And we’re delivering on our promise to offer affordable mortgages to buyers who might otherwise not be able to raise the money to buy a newly-built home.”
He added: “It’s no good hoping people will climb the property ladder if the bottom rung is missing. Affordable properties and available mortgages are vital.
“So we’re working with leading house builders and lenders to get the scheme underway.
“It’s a vital boost to the housing market, giving people good affordable new homes and backing thousands of jobs in construction in the process.”
Mike Leonard, spokesman for the Get Britain Building Campaign, said: “For now we should welcome the NewBuy scheme as evidence that the Government is recognising that we need to do even more to get Britain building using products made in the UK and as result return to growth and full employment.”
But he warned that talk of a recovery in the housing sector had to be put in context.
“Delivery has now fallen below 100,000 against the widely acknowledged requirement for plus 200,000 per annum. Homeless is also increasing as repossession and rent rises in the private rented sector take hold.
“Added to this, smaller developers are being frozen out of the market through lack of finance, and manufactures continue to close with capacity and skills being lost forever.”
