Tens of thousands of home buyers will today be offered 95 per cent mortgages by state-owned banks.

It is a £12 billion move that Prime Minister David Cameron claims will make the ‘dream of home ownership a reality’.

Help to Buy was launched in April initially to provide loans for people moving into newly built homes.

The latest phase is designed to allow first time buyers and existing property owners with a minimum five per cent deposit to buy a property worth up to £600,000. The Government guarantees up to 15 per cent of the loan.

However, the latest announcement was followed immediately by a warning from the chairman of the Commons Treasury select committee, Andrew Tyrie, who said any mistakes in the scheme could ‘carry threats to financial stability’.

He is one of many senior politicians, including the coalition government’s business secretary Vince Cable, who have warned the scheme could cause problems such as a fresh ‘housing bubble’.

Although the ‘Help To Buy’ scheme is only set to run for three years, the select commitee said the government could also come under ‘immense’ political pressure to extend it if it proves popular.

The scheme has already fuelled a surge in interest from homebuyers, pushing up prices across the country, according to a wide-ranging survey of estate agents.

A monthly report from the Royal Institution of Chartered Surveyors (Rics) said prices in September were up for a fifth consecutive month as buyers return to the market in their biggest numbers for four years.

Banks say they will even extend their opening hours in anticipation of extra demand.

Despite these fears, RBS and NatWest are launching their first offers today, with ‘no fee’ deals attracting interest rates of 4.99% for two years or 5.49% for five years.

The Halifax and Bank of Scotland will be ready for the scheme by the end of the week, while Virgin Money and Aldermore Bank plan to begin their offers next year.

David Hollingworth, of London & Country Mortgages, said: “The scheme’s aim was to offer more choice and at better rates, so these deals do seem to tick the boxes.

“It’s now a case of seeing if they are low enough to attract borrowers to the market in increased numbers.”

The Treasury fees for offering the scheme to banks and building societies will work on a sliding scale depending on the loan-to-value ratio of the mortgage being offered. The highest charge will be on 95% loans, as these pose the biggest risk of going wrong.

It has been reported that lenders could pay around 0.9% of the total amount, being borrowers, to guarantee a slice of the loan equivalent to 15% of the purchase price. On a mortgage of £150,000, that would cost the lender £1,350 to guarantee £23,700.

The fees may end up being passed on to customers.