The new mortgage indemnity scheme was developed by the Home Builders Federation and insurance brokers Gallagher Re. The pair have teamed up with Newcastle Building Society to launch the scheme later this month.
Deposit Unlock allows borrowers to secure a new-build home with a purchase price of up to £330,000 with a deposit of five per cent.
Participating housebuilders will pay the cost of insuring mortgages through a percentage of income from house sales.
Lenders will effectively only underwrite up to 60 per cent LTV.
Stuart Miller (pictured), customer director at Newcastle Building Society, said: “Key to our purpose as a regional building society is to help more people get on and up the property ladder especially those without access to the bank of mum and dad.
“Being the first lender to adopt the scheme means we’ll be providing new-build buyers with more options to access low-deposit mortgage products, and helping to address the pressing need for more homes to be built.”
The Home Builders Federation wants to encourage other lenders to join and plans to roll the initiative out on a national level. Until then it will be restricted to the North East of England.
Newcastle BS will release product details later this month.