‘Nationalise’ mortgage lending

The taxpayer may be asked to guarantee billions of pounds of UK mortgage bonds, in a plan which some would see as tantamount to the partial nationalisation of mortgage finance. An influential new report commissioned by the Treasury suggests the measure as the only way to mitigate the downward economic spiral triggered by the global credit crisis.

The report, by Sir James Crosby, deputy chairman of the Financial Services Authority expects the shortage of mortgage finance to last until at least 2010, and is as gloomy an assessment as any analyst might have expected.

In the report, which will be issued later today, Sir James is expected to say it may be necessary for the Government to guarantee new better quality mortgage backed securities, in view of its objectives of supporting financial stability and operating in the long-run interest of consumers and the economy.