Councils and housing associations to help rescue flagging UK property market » Housing » 24dash.com

Councils could get help to buy repossessed and unsold properties under new plans to be announced by the Government, it was reported today.

The measures, which are expected to be announced next week, will give councils and housing associations the means to intervene in the flagging property market.

Local authorities will be able to offer financial help to borrowers unable to pay their mortgages in return for a stake in their homes or outright ownership, according to The Times.

It is understood the measures will be aimed at first-time buyers and people on low incomes, particularly young families.

The extent of the housing crash was disclosed yesterday with the latest figures showing the average UK property had lost 10.5% of its value during the past 12 months - the biggest fall in prices since 1990.

Liberal Democrat Treasury spokesman Vince Cable said it was likely about 300,000 people now owed more on their mortgage than their property was worth, and he warned that the figure could quadruple if price falls continued over the next year.

Similar measures are already being offered in Liverpool where first-time buyers can seek help with deposits from the local authority in return for a small stake in their properties.

A spokesman for the Department for Communities and Local Government said: "We are determined to do everything possible to promote long-term stability and fairness in the housing market.

"The international credit crunch has created significant challenges not just for the UK housing market, but in other parts of Europe and the United States.

"We are looking at a wide range of options to further support the housing market in the current climate, working closely with industry and lenders. What form that support will take will be announced in due course."

Roger Humber, strategic policy adviser to the House Builders Association, a division of the National Federation of Builders, said: "Mopping up unsold stock attempts to show the electorate that something is being done about the housing shortage, but it does absolutely nothing to stimulate the building of new homes.

"The credit crisis is ravaging mortgage markets, leaving lending at an all-time low. This is paralysing the industry, transactions are plunging and new housebuilding is falling to unprecedented levels.

"The effects on economic growth and employment will only worsen unless Government faces the need for decisive action to revive mortgage lending.

"The Council of Mortgage Lenders has proposed sensible and market-testable solutions and we call on Mr Brown to act on these as soon as possible."

He added: "As mortgage markets recover, the housebuilding industry can start to build again, re-employing the many thousands of tradesmen who are currently being laid off."

The Local Government Association (LGA) said proposals for a selective mortgage-to-rent scheme were a "step in the right direction" but councils should decide how the money is spent.

LGA spokesman Councillor Paul Bettison said: "Anything that allows town halls to keep hard-working families in their homes during tough times will be hugely beneficial.

"For decades councils have been offering mortgages and helping homeowners to stay in their homes when they hit hard financial times. A number of councils round the country are introducing mortgage packages in response to the economic downturn."

Mr Bettison said there were concerns about Government proposals made last week on helping councils which want to resume mortgage lending.

"Rules tie town halls to an uncompetitive interest rate, making it practically impossible for them to help out many people," he said.

"Councils need to be given freedom to set their own rates of interest.

"There would also be concerns that the amount of money made available may not be enough to make a significant difference in the current housing climate.

"Town halls must be given much greater financial flexibility to be able to raise the cash that would be needed to offer people money."