Cameron relieved as lenders back home buying initiative

Treasury officials believe the initiative will cost taxpayers nothing as lenders will pay fees for the guarantee, which will underwrite up to 15 per cent of a property’s value.

Buyers face premiums for owning their own homes with deposits of only 5 per cent, as interests rates look set to be much higher than smaller loan-to-value deals.

State-backed Royal Bank of Scotland, NatWest, Halifax and Bank of Scotland, together with Virgin Money and the start-up Aldermore Bank had already joined the scheme when it was unveiled by the Government yesterday.

A further boost came later when HSBC also joined, so lenders representing more than 40 per cent of the market are now committed to the initiative.

So far the lowest rate available for borrowers is being offered by Royal Bank of Scotland and NatWest at 4.99 per cent for a two-year fixed rate deal with no fee, while Halifax is offering a similar deal with a 5.19 per cent rate and a £995 product fee.

Lenders have been given freedom to set the rates but Treasury officials expect that as more banks take part they may come down.

Visiting a new housing estate in Weston Favell, Northampton, the Prime Minister yesterday said he believed the scheme would help the housing shortage.

David Cameron, accompanied by new Housing Minister Kris Hopkins, was shown around a three-bedroom show home and met first-time buyers Kayleigh Groom, 28, and her partner Chris Day, 29, from Kettering.

Ms Groom, who works in data management and Mr Day, who works in engineering, had been renting for five years and told Mr Cameron the scheme would enable them to get on the property ladder.