Unsold properties plan for councils

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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 on Thursday 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."