Councils urged to help homeowners

The credit crunch continues to affect potential homeowners

Councils are being urged to come to the rescue of families who are threatened with having their homes repossessed.

A report by the New Local Government Network think tank says councils should use their lending powers to stave off repossession and eviction.

Mortgage lenders expect 45,000 homes to be repossessed in 2008, nearly 20,000 more than last year.

But the report says councils could help by offering whole or partial mortgages at below the market rate.

The New Local Government Network report says keeping people in their homes would also avoid further pressure on already-stretched social housing, where many evicted families end up.

The government says it is taking action to support the minority of borrowers in difficulty with a £10m package of measures including more face-to-face advice about debt.

It is also considering reforms to the state scheme that pays mortgage interest for borrowers who suffer a sudden loss of income.

Currently that help only begins after nine months.