Reducing the deposit that first-time buyers need is more likely to have a bigger impact on affordability amongst those in their thirties, those who have better-off parents, and those who live in the North or the Midlands, the analysis added.
Some 40pc of those aged between 15 and 34 – 6.7 million people – were living with their parents in 2022, according to the Office of National Statistics (ONS).
Rob Houghton, founder of property comparison website ReallyMoving, said: “There are two main barriers to home ownership: firstly, the deposit, and secondly, affording the repayments.
“The problem with this scheme is it solves one but exacerbates the other, because buying with a 5pc deposit leaves you with a 95pc mortgage to service at today’s higher rates.”
Mr Houghton added: “In London, the average first-time buyer purchase price is £425,000, so after putting down a 5pc deposit of £21,250, monthly repayments on a 95c loan at an interest rate of 6.08pc are £2,440 – assuming a 30-year term.”
Stephen Perkins, of broker Yellow Brick Mortgages said that the policy lacked “real substance”.
He added: “The Mortgage Guarantee scheme has become almost obsolete with standard 5pc deposit mortgages available, and even 1pc deposit options on other schemes from lenders.”
In January, Chancellor Jeremy Hunt was warned against so-called “99pc mortgages” which see buyers needing just a 1pc deposit, with the Royal Institute of Chartered Surveyors (Rics) saying that it would push up house prices.
Other critics warned that without tackling the roots of the housing crisis the policy would fail to support younger buyers. Labour has committed to planning reform in order to build 1.5 million homes.
Jeremy Leaf, former chairman of the Royal Institute of Chartered Surveyors said: “Sadly we have heard similar announcements from both main political parties in the past where the end result doesn’t match the rhetoric. In our view, there is little point in coming to the aid of first-time buyers unless there is sufficient choice of properties for them.”
The Labour Party was contacted for comment.