Gen H has unveiled a new mortgage designed to help first-time buyers and households with small deposits get onto the housing ladder by combining capital repayment and interest-only borrowing.

The “part and part” product allows borrowers to secure a mortgage with as little as a 5% deposit. Up to 80% of the loan can be taken on an interest-only basis, with the remainder structured as capital repayment.

Borrowers will own 100% of their home from the outset and can make overpayments to reduce the capital balance.

Applicants will need a minimum household income of £50,000 to qualify.

The lender said the new option would appeal to renters unable to afford a standard repayment mortgage on the property they want, and who are reluctant to turn to shared ownership or family assistance.

Pete Dockar, chief commercial officer at Gen H, said: “For most people, the path to homeownership isn’t straightforward. In a country where the average house price is eight times the average salary – to say nothing of places like London – the best mortgage products are those that can be carefully tailored to suit the needs of individual buyers.

“Part and part mortgages do exactly that. No more renting. No need for family help. And unlike shared ownership, there’s no staircasing, no frustrating administration, and no rent to be paid; just 100% homeownership from day 1.”

Rachel Geddes, strategic lender relationship director at Mortgage Advice Bureau, welcomed the launch. She said: “Buying a home is one of the most significant ways to build wealth. In fact, our research shows that by continuing to rent, aspiring homeowners could be missing out on up to £340,000 in potential wealth acquisition over 30 years.

“However, many renters believe that owning a home is completely out of the question.

“The good news is that homeownership is often more accessible than people think. It’s our job as brokers to shine a light on the many low-deposit solutions available, instilling more buyers with the confidence to buy sooner.

“We’re delighted to be working with Gen H on the launch of their new part and part mortgage, which will be a game-changer in helping even more reluctant renters become homeowners.”

The launch follows Gen H’s recent entry into the standalone interest-only market. The lender pointed to a sharp decline in first-time buyers using interest-only loans, from 50% in 2007 to just 1% today, despite their continuing popularity among self-employed and next-time buyers.