First announced in the Budget, the scheme will help first time buyers or current homeowners secure a mortgage with just a 5% deposit to buy a house of up to £600,000.

The government will offer lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks.

The scheme is now available with lenders including Lloyds, Santander, Barclays, HSBC, Yorkshire Building Society and NatWest launching mortgages under the scheme today and Virgin Money following next month.

Robert Jenrick, housing secretary, said: “For too many people, no matter how hard they work, home ownership can seem out of reach. One of the biggest divides in our country has been between those who can afford their own home and those who cannot.

“That’s why we are determined to do everything we can to help hard-working families and prospective first-time buyers get their feet on the housing ladder in an easy and affordable way, to level up this country.

“The new mortgage guarantee scheme which comes into effect today will give providers the confidence to lend and help families and young people get on the property ladder without the prohibitive burden of a large deposit.”

Yorkshire Building Society is offering a five-year fixed rate of 3.99% under the scheme. The product comes with a £995 fee and free standard valuation. It isn’t permitted on flats or new build homes.

Ben Merritt, senior mortgage manager at Yorkshire Building Society, said: “As an organisation we’re committed to supporting borrowers with smaller deposits to own their own home, so we’re delighted to be back in the 95% mortgage market.

“It’s been a difficult year for people with limited deposits to get on to, or move up the property ladder but as we, hopefully, come out of the other side of the pandemic they’re once again starting to see more options available to them.”

However, not everyone in the mortgage industry is enthusiastic about the new scheme. Ross Boyd, CEO of mortgage switching platform Dashly, said: “While today’s announcement will undoubtedly be welcome news for generation rent, especially as UK house prices have risen to record levels, buyers should be aware of the interest rates attached to these schemes – sometimes as high as 4% – and the long-term affordability.”