Prime Minister Andy Burnham is to introduce a new scheme to try to help young people get on the property ladder.
The “Your First Home” scheme would be open to first-time buyers in England with a deposit of 2.5%. It would provide them with a loan worth 20% of their new build property’s value to help pay for the purchase.
Burnham said people who do not have support from the “bank of mum and dad” are among those the scheme would aim to help.
There would be an initial interest-free period for the equity loan, with more details expected in next month’s Budget.
The Conservatives warned the policy would leave first-time buyers taking on more debt and risks “pushing up the price of new homes”.
Burnham said: “Too many young people are struggling with the cost of housing, with many giving up hope of ever having a home to call their own.
“So we will step in to help more first-time buyers on to the housing ladder.”
The PM added he believes the scheme will give builders the “confidence to deliver the high-quality new homes the country needs”.
Funding for the scheme is expected to come from reprioritising existing budgets, but housing developers will pay towards the running costs.
Ministers have not yet confirmed whether there is an age restriction on the scheme, or a cap on the price on the value of the property.
The policy is similar to initiatives from previous governments, including the coalition’s Help To Buy scheme, introduced in 2013 by then-Chancellor George Osborne.
It expanded a previous scheme, known as FirstBuy, which was aimed solely at first-time buyers.
Help to Buy initially enabled all purchasers to put down a 5% deposit on a newly built home, with a value of up to a £600,000.
Up to 20% of the cost of the home was funded by a shared equity loan, which was interest-free for the first five years.
The first version of the programme was active until 2021. A second iteration of the scheme, which ran until 2023, restricted access to first-time buyers and applied regional-level price caps to the properties that could be bought.
An evaluation of the scheme, external found more than 387,000 properties were purchased through it, of which 328,000 were by first-time buyers.
In its conclusion, the report noted Help to Buy was “effective in supporting people into home ownership in some areas, but did not remove affordability barriers for first-time buyers in areas that were already relatively expensive”.
Housing Secretary Angela Rayner said “Your First Home” would “build on the lessons learned from previous schemes, while retaining the benefits”.
The Home Builders Federation welcomed the proposals, saying it had “long called for action to improve access to home ownership”.
“Our analysis shows a well-designed scheme can make a meaningful difference for households struggling to get on to the property ladder,” it added.
Conservative shadow housing secretary Katie Lam accused Labour of wanting first-time buyers to “take on even more debt to afford the few homes that have been built”.
She added taxpayers would take a “stake in their homes” and be “picking up the bill for months”.
Lam said: “Slapping another levy on developers risks pushing up the price of new homes too.
“This is a colossal admission of failure. This Labour government is making homes harder to build, then asking buyers to borrow more to pay for them.”
Lam said the Conservatives want to scrap stamp duty, “back British house builders” and ensure that houses are “built in the places that people actually want to live”.
Rayner told the earlier this month that there was only a “slim chance” the government would meet its target of building 1.5m homes in England by the next election, but said she was “not giving it up”.
Data up to June this year suggested the government was behind on the rate of construction needed to meet the goal, which housebuilders have previously warned was too optimistic.
Verify analysis showed a decline in the number of new houses being built during Labour’s first year in power – continuing a fall that began under the Conservatives.