The Government is scrambling to throw lifelines to homeowners suffering as a result of the credit crunch as the Building Societies Association gave warning last night that the mortgage market would not improve for another two years.

Ministers yesterday performed a U-turn on Home Information Packs (Hips), the troubled scheme requiring home-sellers to compile a report on their property, announcing that the full introduction of Hips was being delayed from June until the end of the year. Hips were criticised for being too expensive, creating an additional burden for sellers.

Caroline Flint, the Housing Minister, will today also announce measures designed to provide more help for indebted homeowners, pledging an extra £9 million over three years to fund debt advice and legal support for families facing repossession.

Her announcement will coincide with the publication of figures by the Ministry of Justice that show that mortgage repossession orders made by the courts in England and Wales rose by 25 per cent in the first three months of the year, compared with the same period last year, as more homeowners struggle to meet their mortgage repayments.

Alistair Darling also held talks yesterday with the chief executives of the six biggest UK banks, including RBS and HBOS, to urge them to do everything they can to prevent borrowers from losing their homes. This came as Iain Cornish, chairman of the Building Societies Association, who is also chief executive of the Yorkshire Building Society, said that the damage that the credit crunch had wreaked on the mortgage market was irreversible.

He said: “There is clearly no going back ... It is hard to see global and domestic markets recovering in anything less than a two-year timescale, and when they do, how they operate will be very different to how they were in the first part of the decade.”

The Government will also look at the Mortgage Interest Scheme, the state scheme that helps borrowers in arrears, but will make no guarantee of reforms. The Council of Mortgage Lenders has criticised the scheme for being too slow and offering inadequate financial help for borrowers.

This came as the seemingly unstoppable rise in mortgage rates continued. Alliance & Leicester, one of the UK's ten biggest lenders, announced dramatic increases to the cost of new home loans, as the Bank of England kept rates on hold. The lender raised the price of its deals for borrowers by up to 0.9 percentage points. This pushed the cost of one of its two-year fixed rate deals up to 7.44 per cent, nearly 2.5 per cent above the base rate.

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