The Northern Ireland Co-ownership Housing Association (NICHA) said a lack of funding from the Department of Social Development (DSD) has resulted in the move - which could now hit thousands of people hoping to get onto the property ladder.

NICHA have committed to assisting over 500 applicants next year, which hits their target and the £15m budget set out in the Programme for Government.

The DSD said NICHA have had to cease accepting applications until possible additional funding becomes available.

The move comes after Chancellor Alastair Darling voiced his desire to create more affordable housing in last week's budget.

But Alan Crowe, chief executive, NICHA, said: "Despite the recent announcement that over the next three years £205m will be made available for social housing, together with a series of changes announced to enhance the successful Co-Ownership scheme, our confirmed funding of £15m from the Department for Social Development for the 2008-09 financial year is simply not enough to meet any further applications for Co-Ownership."

The £15m is to help deliver the 525 homes limit in the new Programme for Government, but Mr Crowe said due to strong demand for Co-Ownership houses, there was potential for considerably more. He added that in 2007-08 Co-Ownership will help over 900 households make that first step onto the property ladder, a record number of homes in a year since the scheme started in 1978.

"We are also working with over 700 households currently in the process of applying to buy a home with Co-Ownership."

The Association do not expect households whose applications are being processed, or the 4,000 who currently own a Co-Ownership home will be affected.

"However, as Northern Ireland's regional body for shared ownership and the only viable option for people to reach that first rung of the property ladder, the funding allocation means we are seriously limited in the work we can do to help first time buyers at a time when our services are needed more than ever."

A DSD spokesperson said: "The scheme has been so successful that they have already committed to assisting over 500 applicants next year, in effect already meeting their requirements set out in the Programme for Government.

"All Government departments and the bodies which they fund must stay within their approved budget limits and NICHA is no different. NICHA, having in effect totally committed their budget next year, have had to cease accepting applications until possible additional funding becomes available."