Mr Osborne met housebuilders and mortgage lenders on Tuesday morning to discuss how plans to underwrite £130bn of mortgage lending will work.
The first stage of Help to Buy was launched in April and offers loans to buyers of new build homes priced below £600,000 that are interest-free for the first five years. The buyer needs a 5pc deposit.
The scheme has been credited with spurring a surge in home sales and driving up prices.
The £12bn mortgage guarantee scheme, due to launch in January 2014, is open to buyers of all properties, not just new build, with a 5pc deposit. The government will guarantee a proportion of the home loan as long as the property is priced at less than £600,000.
The scheme will only be available to borrowers who can afford the mortgages, the Treasury insisted, while those with impaired credit ratings will be excluded.
It will also not be available to buy a second home, and lenders will be required to collect a declaration stating that the borrower has no interest in a property anywhere else in the world. It will not be able to be used in conjunction with another state scheme.
Both parts of the Help to Buy scheme have come under attack from bodies including the International Monetary Fund and the Office for Budget Responsibility, which have warned they could create another property bubble.
The scheme was described as “moronic” by Societe Generale SA global strategist Albert Edwards last month for encouraging Britons to add to high debt levels.
After Tuesday's meeting, the Institute of Directors' chief economist Graham Leach said the Help to Buy scheme was "very dangerous”.
“The housing market needs help to supply, not help to buy and the extension of this scheme is very dangerous,” he said. “Government guarantees will not increase the supply of homes, but they will drive up prices at a time when it seems likely that house prices are already over-valued."
Mr Osborne said: "The mortgage guarantee will support an increase in high loan-to-value mortgages for people who can't afford large deposits, and it will also boost house building. As of today lenders have the detail they need to go away and get ready for next January's launch."
Mr Osborne held a breakfast meeting today at Number 11 Downing Street with executives from builders including Persimmon and Taylor Wimpey as well as major lenders such as Lloyds Banking Group and Barclays.
Details of what commercial fees lenders will have to pay to participate in the scheme and whether lenders will get capital relief for offering high loan to value mortgages are yet to be confirmed.
The Council of Mortgage Lenders (CML) said the guarantees must be easy to implement and have a "clear exit strategy".
CML director general Paul Smee said: "The mortgage market is open for business, and it is clear that government support has helped to create more favourable market conditions for homebuyers.
"Lenders, whether they choose to participate in the guarantee scheme or stay outside, will continue to do their utmost to meet households' needs for mortgages, but always in a way that is responsible."
Pete Redfern, chief executive of Taylor Wimpey, said: "The second phase of Help to Buy will benefit the whole market, particularly existing home owners who want to move up the housing ladder but have been unable to do so.
"This will have a direct impact on the second hand market and contribute to the overall health of the housing market with increasing transaction volumes and an increase in house building for the industry and Taylor Wimpey."
Stephen Noakes, mortgage director at Lloyds Banking Group, said: "We continue to work with the Government and other lenders to agree the final details, but expect to have a further announcement on our offering by the end of this year."
The meeting came as new figures showed the number of mortgages approved by banks to home buyers soared to a 17-month high in June
Some 37,278 loans worth £5.7bn were approved for house purchase last month, the British Bankers' Association (BBA) said.
How the Help to Buy schemes work
Help to Buy was a policy unveiled in the March 2013 Budget. The first phase began in April 2013 and the second is due to launch next January.
The first phases is a shared equity scheme open to homebuyers with a 5pc deposit purchasing a new build home valued at less than £600,000.
The government will lend up to 20pc of the property value and the loan is interest-free for the first five years, after which it will incur interest at a starting rate of 1.75pc, rising annually by 1pc plus inflation. Borrowers can repay the loan at any time.
The remainder is funded through a mortgage via one of the participating lenders, such as Nationwide, Woolwich or Halifax.
The second part of the scheme applies to new and existing homes and again is available to borrowers with a 5pc deposit buying a property up to the value of £600,000. The government will provide lenders with a guarantee of up to 15pc of the value of the property.
Have you bought a home through the Help to Buy scheme, or are you planning to sign up? Email [email protected]
