LIVERPOOL’S housing market could be reinvigorated by gilt-edged council loans.

The city council is considering injecting cash into the bottom of the market to ease the “mortgage famine” caused by the credit crunch.

Concerns over falling house prices and a sales slump prompted senior councillors to ask for a feasibility study on offering the Town Hall mortgages.

The scheme could help victims of the crunch, especially first-time buyers and low-income families, get onto the property ladder.

Mortgages are becoming increasingly hard to come by as banks are being more choosey about who they lend to. The rising cost of food and energy bills, along with the economic downturn, is forcing more borrowers to default on loans.

Homebuyers looking to buy in housing market renewal (HMRI) areas – particularly in north Liverpool – are most likely to qualify for the loans.

It would be the first time in more than a decade that Liverpool City Council has offered them.mortgages.

Cllr Flo Clucas, one of the councillors who floated the idea at the end of last week, admitted mortgages would not be arranged for “£200,000 properties in the suburbs” but said the whole of the market would benefit from the extra liquidity.

Cllr Clucas, deputy council leader and executive member for finance and Europe, said: “We can help low income families that are going to be frozen out or young people looking to have their first home. We think we will be able to help a lot of people who want to own their own homes.

“We wouldn’t open this to everybody. We would be looking to help people in certain areas. But it would help people in the rest of the city, who would benefit from the housing market remaining stable.”

She and Cllr Marilyn Fielding asked Phil Halsall, the council’s director of resources, to look at the viability of the plans after he said he could see no reason not to proceed.