The Treasury yesterday unveiled a new consultation on market-led solutions to the crunch in wholesale mortgage markets. Financial Times, Daily Telegraph

The proposals include private sector insurance products to encourage homeowners to borrow at fixed interest rates for longer terms.

The consultation will examine how to unblock the secondary market for securities backed by mortgages, which investors fear could experience much higher default rates than home loans have historically shown. Housing and lender groups have appealed to the government to help unblock the secondary markets for mortgage-backed securities, which have virtually closed because investor confidence in the underlying assets has evaporated.

The document also details more long-term plans for a government working group to set a 'gold standard' for mortgage products, which credit market investors would trust to be genuinely low-risk. The working group will include the mortgage and investment industries, the Treasury, the Financial Services Authority and the Bank of England.