Mortgage crisis timescale warning

The review of mortgage financing - led by the former head of the Halifax Bank of Scotland (HBOS), Sir James Crosby - said it was inevitable that the mortgage market woes would hit house prices.

Sir James said he was looking at how to jump-start the crippled home loan sector "with some urgency". But the interim report cautioned there was no quick fix to ease the log-jam in home loan funding and stopped short of providing any firm solutions to the lending troubles.

Sir James, who was appointed by Chancellor Alistair Darling to lead the review in April, mooted the idea of further temporary support from the Government to help stimulate the mortgage-backed securities market, which has all but dried up amid the credit squeeze.

However, he said that Britain should avoid US-style government-backed agencies to tackle the funding crisis.

"Much has been said about the case for launching a US-style agency but I think it unlikely that it would be right to tackle this century's problems with last century's solution," said Sir James.

Banks and building societies will have to wait for the second report in the autumn for his final conclusions and recommendations.

The Chancellor is also understood not to be planning to make any announcements on the issue until the Pre-Budget Report.

Plans to hold off from taking action until the autumn has already angered lenders, with the Council of Mortgage Lenders saying earlier this month that the Government must "act swiftly" to resolve the current mortgage drought.

Figures from the Bank of England revealed that mortgage approvals plunged by nearly 70% in June to a new record low. Just 36,000 new loans were arranged for people moving house, while net mortgage lending dropped to an eight-year low of £3.1 billion.