The Chancellor is planning to introduce a 99% loan-to-value (LTV) mortgage scheme as part of his preparations for the upcoming Budget, the Financial Times has reported.

According to officials, the scheme would be part of a wider move from the Conservatives to reassure voters that the party is on the side of those looking to get onto the property ladder.

The scheme would see house buyers only need to raise a 1% deposit to put down on their first home, with the Government acting as a loan backer.

Figures published last week by the Office for National Statistics in its most recent UK House Price Index had the average price of a UK home standing at £285,000 – making a 1% deposit for the average home equivalent to £2,850.

While a final decision has yet to be made on whether the scheme will go ahead, the Financial Times suggested that figures in Rishi Sunak’s Government believe the scheme would likely be announced in Jeremy Hunt’s Budget on 6 March.

Sunak has recently stated that the Government has “much more to do” to address the housing crisis, with homeownership among the country’s young generation continuing to decline.

However, experts from the housing sector have previously raised concerns that such a scheme could increase the risk of homebuyers falling into negative equity, and would need to be supported by more efforts to increase the UK’s housing supply.

Head of product at MPowered Mortgages, Peter Stimson, commented: “The Chancellor's move to introduce 99% LTV loans is an irresponsible attempt to grab headlines rather than create solutions and is indicative of a government that has run out of ideas.

“A 99% mortgage is, in essence, a 100% mortgage – the 1% deposit hardly contributes to preventing losses, and this will be reflected in the rates, which in all probability sit well above 6%.

“This approach puts borrowers at significant risk of falling into negative equity and encourages poor financial decision-making. As such, this appears to be a particularly surprising decision from a Government promoting a nation of investors and savers. At a time when climbing the housing ladder is already a struggle, should we really be saddling first-time buyers with even more debt?”

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