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A report by the independent think-tank recommends local authorities should adopt US-style mortgage support plans that 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.

Kevin Morgan, managing director of Hertfordshire-based IFA Consilium Financial Planning Limited, said: "This is another example of a nanny state and the creation of another safety net for people who cannot sort out their own problems. I believe there are more deserved places to put this money."