The second phase of the government’s Help to Buy initiative was launched on Tuesday, providing homebuyers with a £12bn mortgage guarantee scheme.

The scheme enables borrowers to apply for a mortgage with a 5% deposit on homes worth up to £600,000, in a bid to help those who can only afford small deposits onto the property ladder. The lender will cover the remaining 95% of the mortgage, and the government will then guarantee the lender up to 15% of the loan value at a cost, depending on the size of the deposit.

In order to qualify for a Help to Buy mortgage guarantee, the home must:

  • Sell for £600,000 or less
  • Not be a shared ownership or shared equity purchase
  • Not be a second home
  • Not be rented out.

This scheme was originally intended for release in January 2014, but Prime Minister David Cameron announced its new launch date at the recent Conservative Party conference.

Several banks, including Royal Bank of Scotland and NatWest, are now beginning to accept applications. Affordability checks will be undertaken by lenders.