THE keenly-awaited Treasury-commissioned review of mortgage finance, published in the next few days, will disappoint housebuilders and lenders hoping for an early end to the freeze in the home-loans market.

The review, being carried out by former HBOS chief executive Sir James Crosby, was commissioned by Chancellor Alistair Darling in April. Its terms of reference were to “consider options for improving the mortgage-backed securities market, including measures aimed at broadening the investor base for mortgage-backed securities and improving the robustness of the market”.

However, Crosby’s initial report, due in the next 10 days, will merely outline the problem, without offering solutions.

Officials said there was no “magic bullet” that would revive the wholesale-funding markets on which the lenders relied before the credit crisis.

The loss of the wholesale-funding route is largely responsible for a 64% drop in mortgage approvals over the past year, large-scale redundancies among housebuilders and the continuing fall in house prices.

Michael Coogan, director-general of the Council of Mortgage Lenders, said last week that the industry was looking to the Crosby review for action.

“Lending levels continue to be lower than last year and any recovery is still some way away, with little sign of the special liquidity scheme increasing the flow of funds to the industry or lowering the cost of funds as hoped,” he said.

“We look forward to an early, positive report from the Crosby review on how the market should address these issues.”

The Home Builders Federation has warned that its members are facing an unprecedented downturn in activity and that many of the 300,000 jobs in the industry are at risk. Without early action, it says, housebuilding will drop to its lowest level in decades and the official target of 3m new homes by 2020 will not be met.

A second report from Crosby in the autumn may contain specific recommendations, which the government is likely to present as a package alongside a possible stamp-duty holiday and measures to use more of the social-housing budget to buy up unsold new properties by bringing forward some of the £8 billion spending planned for the next three years.

A study commissioned by the Joseph Rowntree Foundation will this week contrast the lack of action by the present government with extensive measures taken by the previous Conservative government during the 1989-93 housing recession.

The report, Housing market recessions and sustainable home ownership, notes that in the early 1990s the government suspended stamp duty on most house purchases, provided housing associations with funds to take unsold properties off the market and channelled state mortgage payments directly to lenders who held off from repossessing properties.

It suggests that beyond the present crisis the mortgage market will change significantly.

Tighter regulation of lenders will “have the effect of reducing the supply and increasing the cost of mortgage borrowing”.

In addition, the market may see the development of longer-term mortgage products, promoted by tax and regulatory changes, as well as direct funding by government. It also warns that the downturn in housebuilding will make it harder for first-time buyers.

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