A Government scheme designed to get mortgage markets moving again is not working, according to a group of MPs. The Communities and Local Government Select Committee says the Treasury’s Asset-backed Guarantee Scheme does not go far enough to ensure the Government will meet its housing targets.

The Committee supports the Government’s decision to retain the house-building targets, despite the credit crunch. But, they say, steps are needed to ensure that house builders can sell the homes they build. The MPs’ report, ‘Housing and the Credit Crunch’, has been drawn up after they took fresh evidence from mortgage lenders.

The findings are published today and the committee’s chair, Dr Phyllis Starkey, said: “In its current form the ABS is a leap that reaches across only half the chasm, impressive, but doomed to fail. If we are to meet house-building targets, then CLG ministers and senior officials must maintain pressure on the Treasury to bring forward new measures to get the mortgage markets moving.”

She welcomed the additional Government investment in building homes for social rent and in low-cost home ownership but said on its own this would not be enough to meet demand. “The availability of private mortgage finance is crucial, and the key to unlocking that finance is the Treasury’s Asset-backed Guarantee Scheme,” she added.

Last year the committee urged the Government to challenge the perception that renting was second best. Phyllis Starkey said: “Current economic circumstances only underscore the relevance of this argument. Yet for thirty years Government policy has focussed on promoting home ownership, with insufficient attention given to the rented sectors. We now need a vigorous debate to review this approach and formulate a more coherent vision to guide effective housing policy and investment into the future.”