ALISTAIR Darling, the Chancellor, set out to calm fears of a house-price crash yesterday by announcing an emergency review of the mortgage market.
The Treasury's investigation into the home-loan market came despite expectations that the Bank of England will cut its base rate today to 5 per cent.
Sir James Crosby, a former chief executive of Halifax Bank of Scotland, will work with lenders,
the Bank of England and the Treasury to "reopen" a market constrained by the global credit squeeze, reporting back to Mr Darling by November.
The Chancellor said he was sympathetic to the plight of homeowners.
"We need to do everything we possibly can to help people through what is undoubtedly a difficult period," he said.
"That means making sure we support the housing market but also making sure we support the wider economy, keeping people in work."
But the move by the Treasury to set up another review – the fourth of the mortgage market since Labour came to power in 1997 – was criticised by housing-market analysts and politicians as "too little, too late".
In the United States, George Bush, the president, has resumed a Depression-era aid programme for stretched home-owners faced with plummeting property prices.
Ruth Lea, economic adviser to the Arbuthnot Banking Group, said the idea of a review that would deliberate for months and produce recommendations in the autumn for the Pre-Budget Report was "laughable".
"Can they be serious? What is the point? The key thing to do is to inject some confidence back into the credit market and the only one fit for the job is the Bank of England," she said.
Ms Lea also questioned why the taxpayer should subsidise first-time buyers with grants of up to £1,500 for legal fees, announced earlier this week.
Philip Hammond, the shadow secretary to the Treasury, said there was little point in another review. "In the face of this urgent economic crisis, all the government can do is dither and delay and launch yet another review.
"Alistair Darling is totally out of his depth and out of touch with the concerns of millions of families. To support the housing market and help maintain consumer confidence, he should be cutting stamp duty for first-time buyers, instead of increasing taxes on the low-paid," he said.
The government also faces trying to make houses more accessible to first-time buyers while at the same time not wanting a big fall in prices for existing homeowners.
The Chancellor has dismissed suggestions that the UK is heading for an early-1990s-style collapse, saying that employment levels are still high and the fundamentals of the economy are still strong.
However, in the 1990s, property prices began to fall two years before unemployment started to rise, suggesting that a fall in prices could perhaps lead to worsening consumer confidence and wider gloom for the economy.
Meanwhile, homeowners will hope that the Bank of England cuts rates by at least a quarter point today, dropping the base rate to 5 per cent.
But such a move will not necessarily be passed on by lenders. Louise Cuming, the head of mortgages at moneysupermarket.com, said: "We have seen increasingly that whatever happens with the monetary policy committee is not translating into new products. The average cost of new products hasn't reflected the 0.5 per cent reduction in base rates we have seen since August last year. That is where the credit crunch is hitting."
She added that about one in five lenders was also unlikely to pass on any cut in full to borrowers if rates fall tomorrow.
To some of the 1.4 million borrowers coming off cheap two-year rate deals this year, however, the HSBC offered the good news that it would match their existing rates.
The offer starts for five weeks from Monday but comes with steep fees of up to £4,099. A spokesman for the bank confirmed that the higher the debt, and the lower the existing rate, the steeper the fee the customer would face.
