However these measures have been used before and have failed to spur recovery, said critics. The New Buy mortgage indemnity scheme has only been signed up to by a small handful of people.
One idea being examined is a new credit easing scheme for housing associations to lower their cost of borrowing, perhaps by allowing social housing bonds to be included in the Bank of England’s quantitative easing programme, according to a report in the Financial Times.
But the Government’s “absolute priority” is to use its strong balance sheet to inject credit into the economy, said Clegg, in an interview with the Financial Times.
Earlier in the year the Treasury supported a £20 billion “credit easing” scheme to lower interest rates for small companies and since then the Treasury has been asked to come up with other similar schemes which could be underwritten without major public outlay.
The Government is looking at “massively amplifying the principle of what we did on credit easing”, said Clegg, according to the Financial Times. “From the top of Government, a few weeks ago we decided this was the route we’re going to take. That’s the instruction we’ve issued to the Treasury,” he said.
"The shortage of mortgage financing is still the biggest constraint on growth," said Pete Redfern, chief executive of Taylor Wimpey. "Only a handful of deals have so far been agreed on the New Buy initiative with customers put off by the 6 per cent lending rate."
“New Buy is working on a functional level but the rates are too high,” he said. “If the Government is to invigorate the housing market, they need to look at mortgage financing.”
Critics of the Government are sceptical about its investment plans. “We’ve heard promises about infrastructure investment time and time again, but nothing has happened,” said Rachel Reeves, shadow chief secretary to the Treasury, according to the Financial Times.
