As part of the package of measures designed to revive the flagging housing market, Stamp Duty is to be axed on properties costing less than £175,000.  The level at which the 1 percent purchase tax has to be paid is to be increased form £125,000, from Wednesday morning. The move applies to residential property, would save someone buying a £174,000 property £1,740.

Other measures in the package include “free” loans of up to 30 percent for first time buyers in England. If a household’s income is les than £60,000 it will be offered loans free of charge for five years on new, co-funded, properties.

Although house prices are reportedly falling at their fastest rate since the early 1990s, rising fuel costs and the global credit crunch are dampening consumer confidence.

The Communities secretary Hazel Blears is set to announce a series of proposals on Tuesday aimed at rejuvenating the housing market. She is one of several cabinet ministers putting forward plans seen as the beginning of Mr Browns “recovery plan”.

The loans system is called HomeBuy Direct, and is to be run together with “large-scale” property firms. Once the five-year “free” period is over, homebuyers will be asked to pay a fee, although what exactly the fee will be remains a mystery.

In a statement, the Department for Communities and Local Government (DCLG) said: “Not only will this help first-time buyers, but it will also support the industry by identifying buyers for their new homes.

“This will help the house building industry weather difficult conditions, so that, when the market recovers, they are ready to expand and get back on with building the new homes the country needs for the long term.”

The government has said that for existing homeowners who can no longer afford mortgage payments, councils and social housing landlords can pay off the debt and instead charge tenants rent “at a level they can afford”.

The DCLG also promises to “bring forward funding for social housing from existing budgets, delivering more social homes sooner”.

On Monday, the prime minister Gordon Brown said the UK faced “unique circumstances”, including oil prices trebling and the global credit crunch.

But Mr Brown said the government was “resilient in… dealing with these problems”.

He earlier denied a rift with Chancellor Alistair Darling, who had said the country was facing its worst economic crisis in 60 years.

For the Conservatives, shadow chancellor George Osborne said: “We will look at the details of these measures and we will support those that will work.

“But let’s be clear, they are not going to help the vast majority of families facing a rising cost of living and falling house prices.

“Nor do they amount to the first instalment of the economic recovery plan we were promised.

“I suspect that what we will see in the coming weeks is a desperate and short-term survival plan for the prime minister rather that the long-term economic plan the country needs.”

Liberal Democrat leader Nick Clegg said: “This looks like a hotchpotch of measures thrown together to save Gordon Brown’s political skin.

“The social housing stock could be increased far more easily by allowing local authorities to buy up unsold properties and use them for new social housing.

“Yet again the government is desperately scrabbling around for a way to fix problems of its own making.”