Prime Minister David Cameron today revealed plans to allow new home buyers to borrow up to 95 per cent of the value of the house.

The mortgage indemnity scheme involves the government underwriting part of the risk and could help up to 100,000 people in the UK get taxpayer-backed 95 per cent mortgages.

The scheme is part of the government’s pledge to “unstick” the housing market and allow the “dream of home ownership” to become a much more likely reality for more households in the UK.

Mr Cameron said in his announcement, “When first-time buyers on a good salary cannot get a reasonable mortgage, the whole market grinds to a halt.

“And that ricochets around the economy, affecting builders, retailers, plumbers – all the people that depend on a housing market that is moving. If we don’t do something like this we are not going to get this vital market moving... We will restart the housing market and get Britain building again.”

The aim is to bring the deposit required down from a typical 20 per cent to five per cent – something which would allow many more first-time buyers the chance to get on the property ladder.

Paragon Group chief executive Nigel Terrington told Property Wire: “We welcome any measures that will help stimulate both the housing and mortgage markets. It is clear that the UK has a serious housing problem, with not enough homes being built and a lack of mortgage finance.

“Current housing completions simply aren’t sufficient to meet forecast household formations, so a commitment to build thousands of new homes is a positive start, whilst plans to support homebuyers through the mortgage indemnity scheme will stimulate the first time buyer market. It is crucial to the success of the mortgage market and the economy that we have a housing market in balance and with growth options across both the rental and owner occupied sectors,” he said.