Darling ready to act on mortgage market

British finance minister Alistair Darling is preparing to intervene to stimulate the UK housing finance market, The Times newspaper quoted senior government officials as saying.

The newspaper said Mr Darling was waiting for the final proposals from James Crosby, the former chairman of HBOS, on which he will base his efforts to revive the ailing British mortgage market.

"Key elements in the Crosby report that Mr Darling is considering most closely are those to renew or extend the Bank of England's Special Liquidity Scheme and another to create a government guarantee for high-quality mortgage securities," it said.

The Times said the Chancellor's proposals were likely to be finalised and presented in the pre-budget report.

Mr Darling was also said to be considering a multibillion-pound plan for the government itself to temporarily guarantee high-quality mortgage-backed securities, helping to create investor demand for quasi-government bonds, aid lenders to sell their loans and boost the supply of finance for lending.

Meanwhile, British house prices kept falling sharply in the three months to August even as the average number of home sales per surveyor hit a new low, a survey showed yesterday. The Royal Institution of Chartered Surveyors said its house price survey balance improved slightly to -81 in August from -83 but still shows a weak picture for the housing market, which is now slumping after a decade-long boom.

"A lack of mortgage liquidity is the key issue which is keeping the housing market from showing any real sign of recovery," said RICS spokesman Jeremy Leaf.

Faced with a global credit crunch, mortgage lenders have tightened up the terms on which they make new loans, demanding as much as 25 per cent of a property's value as a deposit when before they would look for five per cent or even provide as much as 120 per cent of the value themselves.