Treasury scheme to help property market is not working, say MPs

The Treasury's Asset-backed Guarantee Scheme (ABS), one of the key policy measures enacted by the Government to get the housing market moving again, "seems not to be working", according to MPs. The guarantees were made available in April, but none of the major banks has issued a security with such a guarantee.

The Communities and Local Government Select Committee says in a report today that the scheme, designed to bring fresh funding to the mortgage market, is "a leap that reaches across only half the chasm: impressive, but doomed to fail. If we are to meet housebuilding targets, then ministers and senior officials must maintain pressure on the Treasury to bring forward new measures to get the mortgage markets moving."

Phyllis Starkey, Labour chair of the committee, commented: "House-builders simply will not build homes which they cannot sell."

The scheme was recommended by the Crosby review commissioned by the Treasury last year. Experts say that it is too restrictive and expensive for the banks to make much use of.

The Royal Institute of Chartered Surveyors' latest survey of sentiment suggests that price expectations and new buyer inquiries are picking up, albeit from extremely low levels. But the Rics spokesperson Jeremy Leaf said: "Although the market is showing signs of improvement, it is unlikely that there will be a sustained upturn while mortgage lenders remain risk-adverse."

The accountancy firm PriceWaterhouseCoopers also warned of a "false dawn" in the housing market. John Hawkesworth, head of macroeconomics, said: "Our analysis suggests that house prices could still have further to fall. It is more likely than not that real house prices in 2015 could still be below 2008 average levels, after adjusting for general consumer price inflation. Even in 2020, there is estimated to be a 30 per cent chance that real house prices could still be below 2008 levels."