Interest-free loans for council tenants

Interest-free loans could be offered by the Government to five million tenants in social housing, under the expansion of an affordable homes scheme to be announced by the Chancellor this week.

Gordon Brown will announce plans to expand the provision of more low-cost homes in the pre-Budget report on Thursday. It follows the review by Kate Barker, the Bank of England Monetary Policy Committee member, who recommended building 120,000 homes a year to reduce house price rises.

Treasury ministers are also expected to support a Downing Street-backed plan to offer interest-free loans to help tenants in council housing or housing association property pay a deposit on a home and get on the housing ladder.

The loans could amount to 30 per cent of the cost of a home, and would be repaid to the Government by the tenants. The amount loaned would be linked to the number of years they had been tenants, and property prices in their region.

Mr Brown is also under pressure to provide more support for councils to reduce council tax bills next April. One Cabinet minister said: "John Prescott has told the councils in no uncertain terms to keep the rises down to below five per cent. It would be a disaster if they are more than 10 per cent."