MINISTER FOR Finance Brian Lenihan has said that any formal proposal from the banking sector for a scheme in which the State would provide liquidity to the market for first-time mortgages would be examined "on its merits" by his department.

"There is no such scheme under examination by the Government at the moment. The possibility of such a scheme has been ventilated in some banking circles, and I understand that they are preparing a proposal along those lines," said Mr Lenihan at a press briefing on the Government's spending cutbacks.

Although financial and other sources say liquidity raised by selling bank-guaranteed mortgage-securitisations to the National Pension Reserve Fund or another arm of the State would be ringfenced for the first-time home-buyers market, the initiative remains at the planning stage.

Asked if he might support such a scheme, Mr Lenihan offered no view but did not rule out Government support.

"It would be entirely premature for me to comment on a scheme of that type in advance of any thinking being submitted to me. And I don't propose to comment on a scheme of that type in advance of even having sight of it."

Asked if the Government was participating in a study examining the feasibility of such a scheme, he said: "There has been no discussion in the Government about this matter and as far as my department is concerned no scheme has been submitted to my department."

He added: "I've read what you have read in the newspapers. And, of course, if banking circles wish to put together such a scheme naturally it will be examined in my department on its merits."

While no banking institution has made any public comment, the Construction Industry Federation has said such a scheme could unlock the liquidity squeeze and boost the property market.