New measure forms part of government package to kick-start the housing market

The government is to unveil today a package of measures today including “free” loans to first-time buyers in a bid to re-energise the housing market.

Households earning less than £60,000 will be offered loans of up to 30% of their home's value to help them get onto the property ladder.

The loans, which will be co-funded by the state and “large scale property firms”, will be free of charge for five years, the Department for Communities and Local Government (DCLG) said. After that, the homeowners will be asked to pay a fee.

The DCLG said: “Not only will this help first-time buyers, but it will also support the industry by identifying buyers for their new homes.

“This will help the housebuilding industry weather difficult conditions, so that, when the market recovers, they are ready to expand and get back on with building the new homes the country needs for the long term.”

Other measures to be announced by communities secretary Hazel Blears include asking councils or social housing landlords to take on the debt of homeowners who cannot cope with mortgage repayments. The householders would instead pay rent at an affordable rate.

The DCLG has also said it will draw down funding for social housing from existing budgets in an effort to deliver more social homes quickly.

The plans, which are part of a raft of measures designed to boost Gordon Brown's ratings and increase market confidence, come the day after the RICS said that house sales have hit a 30-year low.