Thousands of families are at risk of losing their homes in the credit crunch unless the Government steps in to help, the Liberal Democrats warned today.

Treasury spokesman Vince Cable called for ministers to implement a "mortgage rescue" plan which would help avoid repossessions and tide people over until the global downturn is over.

Among the Lib-Dem proposals are moves to let families struggling with repayments sell all or part of the equity in their house and rent it back from a housing association or private firm.

Another of the party's ideas is allowing councils and housing associations to borrow money to buy up land and empty new homes.

The Lib-Dems also want new court guidelines that would only allow homes to be repossessed in extreme circumstances and the mortgage lenders' voluntary code to be made binding on all lenders.

Mr Cable said: "The Government seems obsessed with fighting a losing battle to artificially prop up the housing market, rather than finding ways to deal with its worst effects.

"Ministers must act to help the thousands of families struggling to keep a roof over their heads.

"The Government should allow councils and housing associations to buy up land as well as empty homes to help replenish Britain's much depleted stock of social housing.

"Ministers must also tighten up repossession rules, to ensure that people's homes are only ever repossessed as a last resort."

Mr Cable said his plans could be funded using money already committed to social housing but currently unspent because of the collapse in new building. The proposals would also save taxpayers the cost of rehousing the homeless.

One million households spend more than two-thirds of their income on housing, according to a recent survey by Shelter, and the number of repossessions has more than doubled in the past five years, reaching a 15-year high in 2007.

The party will debate the ideas at its conference in Bournemouth next month.

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