The deals, which are the first to be made available under the insurance-backed mortgage scheme, will start at 3.50% for a two-year fixed rate.

There is also a five-year fixed rate at 3.75%. Both products are fee-free and come with a free valuation to further support low-deposit borrowers.

The mortgages will initially be available on selected plots in the North East of England through four participating house builders – Barratt Developments, Bellway, Keepmoat and Vistry, the building society announced today.

Deposit Unlock has been described as an ‘innovative’ mortgage indemnity scheme developed with the Home Builders Federation and insurance brokers Gallagher Re.

The scheme aims to help borrowers secure a new-build home up to a value of £330,000 with a deposit of just 5% and acts as an alternative to the Mortgage Guarantee Scheme and Help to Buy.

Stuart Miller, chief customer officer at Newcastle Building Society, said: “More than ever, we need to help provide more options for low-deposit borrowers looking to buy a new-build home. Deposit Unlock is a truly innovative initiative and we’re pleased to be the first lender to offer products under the scheme.”

The launch of Deposit Unlock mortgages follows the announcement earlier this month that Newcastle Building Society was one of the first lenders to support the government’s First Homes scheme.

Miller added: “Both Deposit Unlock and First Homes are examples of forward-thinking collaboration, bringing new products to the market to help people achieve the dream of owning their own home.”

The scheme has been given the thumbs up by both the Building Societies Association (BSA) and the Intermediary Mortgage Lenders Association (IMLA).

Paul Broadhead, head of mortgage & housing policy at the BSA said its research showed raising a deposit was now the single biggest barrier to would-be buyers. He thought  the scheme would be particularly helpful to younger buyers who were struggling to save for a deposit whilst also paying rent.

“Building societies are synonymous with home ownership and it is good to see Newcastle Building Society leading the way as the first lender to sign up. I am confident that more will follow,” he said.

Meanwhile, Kate Davies, executive director of IMLA described the unveiling of the scheme as ‘a positive step forward in the provision of low-deposit lending’ which would open another door for those wanting to buy properties that have traditionally been more difficult to finance – such as new-build homes and flats.

“The government’s announcement that its Help to Buy Equity Loan scheme would be withdrawn in 2023 signalled a clear need for viable alternatives like these, to help more people step onto the property ladder, as well as progressing up it,” she said.

“There are, of course, other providers developing innovative schemes aimed at providing an alternative to Help to Buy.

“IMLA is pleased to have been able to facilitate discussions between providers and members and we are delighted that one of our members – Newcastle Building Society – is the first to launch with Deposit Unlock.  We wish it every success.”