The housing market is in much better shape than it was before it crashed in the early 1990s, Alistair Darling said last night, promising to back the wholesale martgage market and insisting that similarities with the troubled US market had been exaggerated. Financial Times, The Times

Most house price measures have fallen over the past three months and mortgage approvals have plummeted since the summer, but the chancellor told an audience of manufacturers that 'market conditions today are very different to those we saw in the early 1990s'.

Speaking at the EEF manufacturing body’s annual dinner, he acknowledged that lenders were facing 'tight conditions' in mortgage finance and pledged action to aid the recovery of wholesale mortgage markets, something he said was 'essential to stabilising the housing market'.

The Treasury favours a German-style private sector approach, with a clearly structured wholesale mortgage financing market, rather than a US-style government agency that lends money to banks in return for mortgage-based collateral.

The Council of Mortgage Lenders is pressing for the more interventionist US approach, since it fears there will be a £30bn shortfall in mortgage finance this year. It points out that the European mortgage-backed securities market has been effectively closed since last summer and retail bank deposits will be insufficient to cover normal demand for mortgages this year.