Charles Gallagher, chairman of the federation, warned that a "kick start" was needed to stop the economy falling back into recession as early as this summer.
Mr Gallagher, speaking in Birmingham at the Building Societies' annual convention, attacked recent statements by ministers that have questioned the value of home ownership. He said plans to change mortgage protection payments, announced in the November Budget, were an example of the Government's changing attitude.
Mr Gallagher also called on the Government to raise the level of tax relief on mortgage interest payments from pounds 30,000 to pounds 50,000.
"A lack of confidence in the Government's attitude to home ownership, together with a lack of confidence in the economy, is holding back the housing market, and a weak housing market is holding back the domestic economy," he said. "A package is, in my view, urgent. There is now a real risk of the domestic economy slipping back into recession. In such circumstances, hopes of tax cuts or other fiscal relief will disappear."
The Bank of England director, William Allen, warned house prices may start to slide because of weak UK domestic demand and lower inflation. "Demographic factors too seem unlikely to stimulate demand. The number of people between 20 and 29 - candidates to become first-time buyers - shows a fall of 1.7m in the current decade," he said.