Legislation will be introduced by December next year to stop consumers being forced to take out insurance policies linked to their mortgages.
Mr Byers said: "These new measures will mean that we will no longer be in the position where borrowers are paying less for their mortgage but more than they need to for their insurance."
The move follows the DTI's decision to enforce uniform rules for lenders when they quote a mortgage's annual percentage rate, or APR.
However, yesterday's surprise announcement on insurance was dismissed as "largely irrelevant" by the Council of Mortgage Lenders (CML), which represents the big mortgage providers.
Michael Coogan, director-general of the CML, said that the industry was still waiting for the Government's pronouncement on the future regulation of the industry as a whole. He said that insurance tie-ins affected just 100 of the 4,000 mortgage products available.
"Give us the big picture. Having a few extra pieces added to the jigsaw in this way just confuses the industry and customers. We are keen that the important announcements are made as soon as possible," Mr Coogan said.
The Government was due to decide by the end of this year whether regulation of the industry, currently split between two government departments, two regulators and the CML should come under the statutory remit of the Financial Services Authority alone. This is favoured by the CML. However, that announcement is not now expected until early next year.
The FSA is also due to announce whether it will investigate alleged misselling of endowment policies related to mortgages by the end of this year.
Disagreeing with the CML, Miles Russell, head of public affairs at Direct Line, a new entrant to the market, said tackling negative product features one-by-one was more important than the wider regulation question.
"Under the FSA, they [big lenders] think they will be able to carry on with products detrimental to the consumer," he said.Reuse content