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A report by the independent think tank recommends local authorities should adopt US-style mortgage support plans which offer below market rate, whole or partial mortgages to either stave off repossession, prevent remortgage difficulties or support local first-time buyers.

Under the scheme, councils would be able to borrow money under prudential borrowing rules and offer support to a select group of people, such as first-time buyers or people involved in mortgage difficulties, particularly when numbers of mortgage defaults might impact disproportionately on social housing demand in the area.

Anthony Brand, spokesman for NLGN, said: "The government should set £2bn of its £50bn intervention package aside for supporting these measures, and allowing the hardest hit councils to apply for funding. This could help up to 15,000 people out of difficulty and even provide a long-term profit to the Treasury."