Mortgage plan 'doomed to fail'

The committee said more must be done to boost the housing market

A government scheme to kick-start the UK mortgage market is not working, MPs have said.

The £50bn asset-backed guarantee scheme (ABS) was "doomed to fail", according to the Communities and Local Government (CLG) Committee.

Further steps must be taken to boost mortgage lending if the housing market is to recover, it added.

The government said it was working hard to improve access to mortgages and protect jobs in the property sector.

'Vigorous debate'

The MPs' report came as two separate reports - by PricewaterhouseCoopers and the Royal Institution of Chartered Surveyors (RICS) - said that UK property prices would struggle to make meaningful recoveries until mortgages were more readily available.

In its current form the ABS is a leap that reaches across only half the chasm: impressive, but doomed to fail Dr Phyllis Starkey, chair, CLG committee

Latest figures show that mortgage lending picked up in May. But the number of home loans was still 28% lower than a year ago, according to the Council of Mortgage Lenders (CML).

The asset-backed scheme, announced in this year's Budget, provides guarantees on lenders' mortgage-backed securities - a step that enables them to sell on mortgages to investors, raising new money to lend to consumers.

But restrictions on which institutions can take part, and the types of loans that it covers, meant that it had so far had limited success, the MPs said.

Rental sector

"In its current form the ABS is a leap that reaches across only half the chasm: impressive, but doomed to fail," said chair of the committee, Dr Phyllis Starkey.

"If we are to meet house-building targets, then CLG ministers and senior officials must maintain pressure on the Treasury to bring forward new measures to get the mortgage markets moving."

The report added that government policy gave too much attention to promoting home-ownership, with not enough attention given to the rental sector.

"We now need a vigorous debate to review this approach and formulate a more coherent vision to guide effective housing policy and investment into the future," Dr Starkey said.

We continue to do all we can to help the housing market Department of Communities and Local Government spokesman

And it called for skills and capacity in the UK construction sector to be protected, warning it took ten years to rebuild capacity in the construction industry after the last recession.

For the Conservatives, Grant Shapps said the report showed the government's "inability to get beyond headline grabbing housing announcements which later turn out to be empty".

And Kay Boycott, for housing charity Shelter, said the report was right to flag up "our obsession with home ownership".

Future housing policy should look at making renting more attractive by improving standards in the private rental sector and giving tenants more protection, she said.

A spokesman for the Department of Communities and Local Government said the report had recognised there had been "significant additional investment in building new homes".

"We continue to do all we can to help the housing market and are working hard with the Treasury and Council of Mortgage Lenders to improve access to mortgages," he said.

The government had come up with new ways to protect tenants in its response to the Rugg Review, a study into the private rented sector, he said.