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The government has announced a £1 billion package of measures to help kick-start the housing market and revive the economy. But they have been met with a less than enthusiastic response.

Many in the housing industry reacted by saying it was "too little too late".

Under the the goverment's proposals first-time buyers will be offered 'free' loans as part of the government's package to kick-start the property market.

The programme, called HomeBuy Direct, will offer first-time buyers with a household income below £60,000, loans worth up to 30 per cent of a new home which are interest-free for five years.

The government expects this will help 10,000 buyers on to the property ladder.

And in a surprise announcement the government said today that stamp duty on houses worth less than £175,000 would be suspended for one-year from tomorrow (September 3rd)

Meanwhile, for the estimated 9,000 families on the brink of repossession, the government is launching a mortgage rescue scheme.

Under the scheme social landlords, such as housing associations, would pay off the debt and the homeowner would then rent the house back at an "affordable" level.

Extra cash will also be available for cheap housing schemes, which could see 5,500 new homes being built over the next 18 months.

Prime Minister Gordon Brown said: "These are the things that a government should do as we come through what is a difficult situation, to show that the economy is resilient. We will come through these problems."

Chancellor of the exchequer, Allistair Darling said the purpose of the measures announced today was "to help people through what is a difficult time".

But he admitted there was "a wider range of issues" the government needed to look at and that one of those was the availability of mortgage finance.

"What's also important is the wider economy," he said. "As I said at the weekend, we face a unique set of circumstances that we've not seen in generations where you have a credit crunch, high oil and food prices. I remain optimistic that we can get through it, we will get through it. Today's measures helping the housing market are one example of how the government can help the people and help the economy."

But Russell Jervis, managing director of estate agent network haart said: "With property prices falling by 15 per cent in many areas already this year, we have seen a renewed interest in first-time buyers looking to purchase a property.

"However, this important group of buyers is being stopped in its tracks by a lack of available finance and the crippling stamp duty tax, which has prevented the enquiries translating into sales."

Sue Anderson, a spokeswoman for the Council of Mortgage Lenders, said the organisation was still assessing the impact of the announcement, adding that it looked as if the majority of homebuyers would still have to pay the tax.

She said: "Although it is a welcome move in that it aleviates some of the problems with house purchase one unintended consequence might be that first time buyers still hold off and then come back to the market just before the deadline next year".

And Ray Boulger, senior technical manager at mortgage broker John Charcol, was scathing in his criticism of the proposal to suspend stamp duty for 12 months saying the move was "absolutely not the answer" to the problems the market and homeowners alike faced.

"The housing market has spluttered through the last few months with indecision on whether there would be a redefining of stamp duty clearly costing the wider economy. Yes, it will help a small minority of people, but the issue lies more with mortgage lenders and their ‘shut up shop’ attitude to lending above certain loan-to-values. The government needs to address this situation above all others," he said.

Mr Boulger also questioned whether the government had "truly thought this through" arguing that a total suspension of stamp duty would have cost the government less than £2 billion a year which he said would have had a much greater as a stimlus package for the housing market.

Liberal Democrat leader, Nick Clegg accused the prime minister of attempting to save his job rather than the economy.

He said: "If the prime minister really wants to help people on low and middle incomes he could take the simple and obvious step of cutting their taxes, releasing billions of pounds to boost the economy.

“Under Labour, the poorest are feeling the pain of Gordon Brown’s legacy as chancellor, while the richest take advantage of numerous loopholes to avoid paying their fair share.

“The government’s response is to try to bribe people into buying houses in a falling market. The last thing vulnerable first time buyers need is Gordon Brown sucking them straight into negative equity with the housing market in free-fall."