Treasury officials have drawn up plans to allow new homeowners to take out 99% mortgages as part of proposals to make it easier for young buyers to get on the housing ladder.
The scheme would only require home buyers to put down a 1% deposit on their first home, with the government guaranteeing the additional risk to lenders of mortgage default.
The plans are part of a wider package of measures being considered by the government to help first-time buyers before the next election.
A Treasury source confirmed that Jeremy Hunt had asked officials to cost the scheme before next month’s budget but cautioned that an announcement might not be made until the autumn.
At present the government’s mortgage guarantee scheme can help buyers who have a minimum 5% deposit.
The Treasury source said that reducing this to 1% would only help a “small number of people” and might have to be combined with other initiatives to make a significant difference to new buyers.
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