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The government appears to be preparing to put another £200bn of taxpayer funds at stake in a new attempt to kick-start the moribund mortgage market.
Alistair Darling surprised the high street banks by saying he was minded to support a proposal made in the long-awaited Crosby report which involves providing a guarantee for mortgage-backed bonds. These helped the housing market thrive until the credit crunch started to bite last year.
In his pre-budget report Darling said he would discuss the matter with the EU, as it would likely require approval for state aid.
Lenders had been hoping Darling would seize upon any recommendations made by Sir James Crosby, the former HBOS chief executive who was commissioned by the chancellor to investigate mortgage funding.
Crosby has recommended transferring the risk from investing in mortgage-backed bonds from investors to the government, to kick-start the demand for such bonds, which have turned sour in the financial meltdown.
In his July interim report, Crosby made it clear his aspiration was not to return to an era of easy money, where loans were granted too easily on houses that have since fallen in value. But he did produce statistics that made it clear there has been a dramatic downturn in the amount of financing available which would lead to a shortage of mortgage financing until 2010, and possibly beyond.
The report showed how quickly the lenders had come to rely on boosting their lending beyond the means provided by deposits from savers. In 2000, they borrowed £13bn from the wholesale markets and by 2007 this had risen to £257bn - about £201bn of this came through mortgage-backed securities.
By providing a government guarantee, these mortgage-backed securities may once again become more attractive to big banks and institutional investors which had chased the returns they offered before the US housing market went into decline last year.
Injecting life into the wholesale funding market is regarded as crucial to restart the mortgage market. A decade ago, the top 10 mortgage providers financed more than 70% of the home loans granted out of savers' deposits. By the end of last year, that figure had fallen to 55% as lenders turned to international finance markets to package mortgages into bonds bought by international investors, largely from the US.
Crosby's interim report laid out the dilemma facing the government in deciding to guarantee mortgage-backed securities by pointing to the impact on "fiscal, debt management and legal implications, and the extent to which the government might distort incentives and create a moral hazard rather than help investors and issuers price that risk more accurately".
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