Government urged to act fast on mortgage guarantees

Fears of further house price drops and plummeting housing starts has prompted calls for the government to immediately act on plans to give mortgage guarantees.

Lenders have urged chancellor Alistair Darling to fast track a scheme to adopt recommendations by Sir James Crosby to give mortgage guarantees.

Crosby warned house builders could suffer further if the wholesale mortgage market was not overhauled so that more mortgages were made available next year.

He said there was a “real risk” the market could “overshoot on the downside” as house prices fall too fast.

“Such a downward spiral would have serious consequences across all segments of the housing market and across all industries dependent on housing activity,” Crosby said.

“The effect would be felt most acutely in the overall number of housing starts and more specifically in lower-priced housing in the least expensive localities.”

Buy-to-let lender Paragon’s chief executive Nigel Terrington told the Guardian Crosby’s recommendation on mortgage guarantees was the “single most important measure” unveiled by Darling.