Sir James Crosby’s interim report into the current crisis in the mortgage market has warned that the UK is unlikely to see any respite until 2011 and there are few solutions to help the situation.

Crosby, the former chief executive of HBOS, was commissioned by the Chancellor of the Exchequer, to analyse the current condition of the mortgage market and to make recommendations on how mortgage lending could be revived. He outlined a number of potential solutions suggested by 30 different associations and authorities across the industry, both nationally and internationally.

The suggestions included Government intervention in the market for mortgage-backed securities which could include the Government giving a taxpayer guarantee to billions of pounds of mortgage market bonds. Another suggestion was to boost the confidence of investors by creating cross-border ‘gold-standard’ for securities. There were also calls from some for greater transparency in the market. Others have suggested an extension to the Bank of England’s special liquidity scheme which allowed banks to swap £50bn of mortgages for Government bonds.

Crosby warned against a US-style government-backed agency which would transfer credit risk from investors to the Government. The current problems faced by Fannie Mae and Freddie Mac in the US have gone someway to discrediting this idea.

John Heron, director of mortgages for Paragon Mortgages, told PIN: “ Crosby has consulted far and wide and has got a good grip on the current environment. He has made very sensible and fundamental observations. My concern lies with the general signals from the Government where there appears to be a collective crossing of fingers. It is abundantly clear that things are badly wrong, with the root cause being the dysfunction of the mortgage market. A measured intervention is urgently needed as it will take a number of months before any effects are felt.”