First-time buyers could be offered interest-free deposits as Liverpool pioneers a new system to help people buy homes in the credit crunch.

Known as the 'Equity Loans for Purchase' scheme, the council is hoping to help buyers with a deposit of up to 25% of the property price. The owner would then pay no rent or interest, just repay the council 25% of the price when the property is sold.

Councillor Marilyn Fielding, Liverpool's Executive Member for Safer, Stronger Communities, said: "This is a wonderful idea that will help individuals and families get a foot on the property ladder in the current difficult economic circumstances. There is absolutely nothing to repay until the property is sold so the homeowner has full control over the property.

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"It shows that as a council we listen to people's concerns, take them onboard and do our utmost to act on them.

"But helping people access home ownership is not the only benefit - this initiative will help create more sustainable, safer communities by keeping a larger proportion of homeowners in all our neighbourhoods."

The new scheme provides a healthy, simplistic and fairer alternative to the shared ownership scheme which offers reduced mortgages but owners still pay rent on a percentage of the property. It will also appeal to lenders in the current economic climate.

The council has submitted a detailed bid to the Homes and Communities Agency to allow it to utilise its 'Affordable Housing Programme' fund to test the market with a pilot scheme in Liverpool.

If successfully rolled out, the initiative could dramatically increase the new supply of housing which will support Liverpool's projected economic growth.

(CD/JM)