Low deposit mortgages will make a comeback next month with a new five per cent deposit home loan guarantee, Rishi Sunak has announced.

The Chancellor also announced a “mortgage guarantee”, telling MPs: “Lenders who provide mortgages to homebuyers who can only afford a 5% deposit will benefit from a Government guarantee on those mortgages.

“I’m pleased to say that several of the country’s largest lenders including Lloyds, NatWest, Santander, Barclays and HSBC will be offering these 95% mortgages from next month, and I know more, including Virgin Money will follow shortly after.

“A policy that gives people who can’t afford a big deposit the chance to buy their own home. As the Prime Minister has said, we want to turn generation rent into generation buy.”

The scheme will be available to current homeowners as well as first-time buyers looking to buy a house for up to £600,000.

The initiative will be available to lenders from April and is designed to increase the appetite of mortgage lenders to offer high loan-to-value lending to creditworthy customers across the UK.

Under the scheme the Government will offer to take on some of the risk of low deposit loans, meaning lenders would have some protection from potential losses.

On stamp duty, Rishi Sunak told MPs: “I can announce today the £500,000 nil rate band will not end on March 31, it will end on June 30.

“Then, to smooth the transition back to normal, the nil rate band will be £250,000, double its standard level, until the end of September – and we will only return to the usual level of £125,000 from October 1.”