The programme is designed for buyers who have a regular income but have been unable to save for a large deposit or do not have financial support from their family. Under the scheme, first-time buyers will receive a 20% equity loan to help them purchase a new-build home, with an initial interest-free period and a requirement of a minimum deposit of just 2.5%.

Household income caps and a deposit cap will be introduced to exclude those on the biggest salaries and with large savings pots. The scheme is targeted at those who may struggle to buy a home on their own. Price caps will ensure people can only buy modest houses.

In an interview with the Guardian on the eve of Labour's party conference in Liverpool, the prime minister said: 'Too many young people are struggling with housing, with many giving up hope on ever having a home to call their own.' He added: 'So we are going to help more first-time buyers on to the housing ladder, especially those who can't call on the bank of mum and dad.'

Burnham also unveiled plans to strengthen the powers of local leaders to take over long-term empty and derelict homes, reversing changes made by the Conservatives. Housing ministers and officials under Keir Starmer's government argued for a new version of help to buy but were ultimately overridden by then chancellor Rachel Reeves, who wanted to focus more on boosting housing supply.

Some changes have been made to George Osborne's original scheme, under which 387,000 people were supported, after concerns it was targeted at those who would have got on the housing ladder anyway and contributed to soaring house prices. 'We think some adjustments needed to be made to it to make it focus on the people who really need support, and I think our scheme does that,' Burnham said.

Officials said the programme, which will be announced by John Healey in the budget and open for registration by the end of 2026, would be funded by reprioritising existing government budgets. It was not immediately clear whether the money would come from funding already earmarked for housebuilding, or would mean cuts elsewhere. Developers will pay a fee related to property values to participate, which will contribute to its running costs.

Burnham denied the scheme would just push up house prices even higher by driving up demand, saying that the government would also make sure more homes were built across the board. 'No, it's also about making sure that we are building more homes across the board … We are working actually to increase supply of housing, which also helps in terms of not pushing prices up,' he said.

However, Angela Rayner, the housing secretary, acknowledged last weekend that there was only a 'slim chance' the government would meet its target of building 1.5m homes in England by the next election.