Alistair Darling yesterday offered what appeared to be a quick shot in the arm to the mortgage lending market, promising to implement recommendations made yesterday by Sir James Crosby that mortgage-backed securities should be covered by government guarantees.
Sir James’ report, commissioned earlier this year, was finally released yesterday.
It concluded that lenders’ inability to obtain capital to lend to home buyers 'was the sort of market failure that might call for government intervention, perhaps even on a significant scale'.
Indeed, he suggested, the shortage of funds was so severe that it was very likely that net new mortgage lending would fall below zero.
Mortgage lending in the UK is no more than 50% of what it was in 2007.
The 'significant scale' of government guarantees suggested by Sir James is up to £100bn to take place in 2009 and 2010.