President George W Bush is today expected to reveal details of a sub-prime rescue plan, designed to prevent a wave of home repossessions across the US.

The deal, arranged with the US Treasury Department and mortgage industry leaders, could help up to two million homeowners who took out mortgages on cheap rates that are set to rise in the new year. This could prevent further mortgage defaults from fueling the global credit crisis.

The US president will discuss the steps at 18.40 GMT today.

It is expected that the deal will temporarily hold rates for 500,000 borrowers who would otherwise lose their homes. One mortgage investor trade group has suggested a five-year freeze on rates for any homeowners facing rate increases in the next two-and-a-half years.

Henry Paulson, the US Treasury Secretary, said earlier this week that he was confident of securing an agreement with banks and regulators this week as a pragmatic response to the worst housing crisis that America had experienced for 20 years. He added the deal might not solve all the housing market's problems but it would prop it up.

Around 1.54 million sub-prime mortgages, with a value of about $362 million (£175 million) are due to be reset at a higher rate next year.

Typically, an initial interest rate of about 7 per cent is charged on a sub-prime mortgage for the first two or three years, before it rises to between 9.5 and 11 per cent, costing the borrower several hundred dollars a month more on the average mortgage.

Goldman Sachs, Citigroup, Countrywide Financial, Fannie Mae, Wells Fargo and Washington Mutual are among the parties most actively engaged in the talks to strike a deal.

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