A leading business group has urged the government and businesses to adopt a two-pronged approach to deliver both short and long-term solutions to the housing crisis.

The Confederation of British Industry has said boosting housing activity is crucial for sustained growth and economic recovery. "A well-functioning housing market is a critical precursor to long-term economic health," the group has noted in a report titled "Unfreezing the Housing Market."

The government needs to devise a dual strategy that will enable the housing sector to move in the short-term and help tackle structural failures to ensure long-term stability. Introducing a mortgage indemnity guarantee insurance scheme to enable first-time buyers to avail of low-deposit mortgages and allowing them to access savings locked up in their personal pension pots to boost their deposits are among the short-term measures suggested by the CBI.

The longer-term recommendations include reducing the regulatory drag on house builders, ensuring that the planning system is pro-growth to make the building of more new houses possible and reviewing stamp duty.

In a bid to aid those existing homeowners wanting to move house, the confederation has suggested introducing special mortgage products designed for owners in negative equity. The CBI has also urged the government and financial institutions to ensure the availability of development finance to small and medium-sized house builders.

"We have to do more to give our young people hope in the future and support their aspirations to be homeowners. We could reduce the risk of higher loan-to-value mortgages if the government encouraged lenders to take out insurance against the borrower failing to meet payments," said John Cridland, the CBI Director-General.

"We can also jump-start the housing market by allowing first-time buyers to boost their deposits by borrowing their own pension savings, and ensuring existing owners who want to move house have more options," he added.

Mortgage