According to some officials plans being looked into by ministers and the government to try and rescue the mortgage market could end up costing taxpayers around £40 billion. Reports have suggested that the government may will looking to underwrite billions of pounds worth of mortgages in a scheme that would see the type of government guarantee extended to Northern Rock also being extended to other home loans.

Officials have said that the scheme is part of the Prime Minister’s plans to try and tackle the economic downturn and the problems that are facing the housing and mortgage markets. Gordon Brown has been drafting plans to try and tackle the many problems facing the housing and mortgage markets, and a number of measures are going to be put into place.

However, the possibility of this extended guarantee on loans has fuelled concern amongst critics, who have said that using taxpayer’s money to back up the mortgage market brings with it many risks. Reports suggest that government officials are aware of the risks that will come with this move, including the risk of lenders behaving recklessly when it comes to lending because of the guarantees that are in place.

One official, former Halifax boss Sir James Crosby, has been assessing ways in which the government can help to breathe life back into the mortgage and housing markets.

A spokesperson from the Treasury spoke about the project, stating: ‘One major problem is a lack of mortgage finance, so if there is anything we can do to help with that we should think about it. If Sir James comes back with something credible that doesn’t expose the taxpayer to too much risk then we would be wrong not to consider it.’

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