Older homeowners should be offered tax breaks to downsize in an effort to ease the UK's shortage of family homes, MPs said.

A cross-party group called for a "Help to Move" package of financial help similar to the Government's "Help to Buy" initiative offered to first-time buyers.

It would exempt pensioners from stamp duty on homes worth up to £250,000 and provide equity loans in a bid to help those struggling to access mortgages.

Research by the thinktank Demos found a third of over-60s were keen to downsize and a quarter said they were interested in buying a retirement property.

But up to half could not afford to bridge the gap between the value of their homes and the cost of a retirement property.

A package of financial help — as well as including housing in statutory advice over using new freedoms to draw down cash from pension pots — could free up as many as 4.3 million family homes, it suggested.

The hit to the Treasury from lost stamp duty — of up to £2,500 per move — would be more than outweighed by what it received from knock-on moves, the report by the all party parliamentary group on housing and care for older people said.

Committee chairman Lord Best, the former head of the National Housing Federation, said: "More and more people in their 'extended middle age' are thinking about downsizing.”

The report was written by Claudia Wood, chief executive of Demos, which provides secretarial support to the committee.