UK housing
Cheap mortgages have helped the UK housing market to recover.Reuters

The Liberal Democrats have announced housing scheme designed to help first-time buyers who cannot afford the large deposit required for a housing loan.

The "Rent to Own" scheme, which forms part of the Lib Dem's new manifesto, aims to help young people build up a share in their home through renting.

Deposits for mortgages are a major hurdle for new buyers. The average first-time buyer in London currently requires a deposit of £64,000 ($95,000) to buy a home.

The scheme will involve participants paying a monthly amount, equal to market rent, for 30 years at which point, they will own the property.

"For working young people the dream of home ownership is increasingly out of reach. Prices are so high renters cannot afford to save for a deposit, which means they can never take that first step onto the housing ladder," said Deputy Prime Minister and Lib Dem leader Nick Clegg.

"Rent to Own will mean, regardless of their background and family circumstance, they will be able to make this a dream a reality. This is about building a stronger economy and fairer society, and making sure Generation Rent has the same opportunity to get on in life as their parents and grandparents before them."

However, the "Rent to Own" monthly payment is expected to be higher than a monthly mortgage payment for the same property. So the scheme will probably only benefit first-time buyers who have relatively high incomes.

Housing associations will have to build new properties specifically for the Rent to Own market.

The Lib Dems noted they are planning to create 30,000 rent-to-own homes by 2020, by working with housing associations and other organisations.