More than 130 developers have agreed to offer the HomeBuy Direct scheme which will help up to 18,000 first time buyers to purchase a home at sites across England aided by an equity loan, part funded by the Government and the developer.
The equity loan, which will be free of charge for five years, can be used as a deposit and can cover up to 30% of the purchase price.
This means a first-time buyer could purchase a house worth£180,000 for as little as£126,000. As with other HomeBuy schemes, any first-time buyers whose household income is under£60,000 who cannot otherwise afford to buy will be able to apply.
Housing Minister Margaret Beckett said: "We are determined to give families real help in the current economic climate.
"For many young families who aspire to own a home, the difficulties in the housing market have made the step on to the property ladder that bit harder."
Sir Bob Kerslake, Chief Executive of the Homes and Communities Agency said: "There has been a tremendous response from developers to this scheme and we believe there is demand from purchasers who want to get on the property ladder.
"Our flexibility means that we have been able to add in additional funding from the National Affordable Housing Progamme to meet demand and respond quickly to the market."