A treasury report into ways the
UK economy can recover from the current slowdown has concluded that the government have to guarantee billions of pounds of the mortgage market. 

In recent months, the availability of mortgages has been reduced by banks and building societies, and many of them are asking for larger deposits or are lending smaller amounts. 

The new report fears that a long-term mortgage drought would turn the current downturn in house prices and consumer spending into something considerably worse. 

One option for improving the availability of mortgage finance would be for the government to guarantee new better quality mortgage-backed securities, to re-stimulate demand for these securities. 

Government intervention was just one of several options the report put forward but one that was supported by the Council of Mortgage Lenders (CML). The option has also caused controversy, however, because it would mean taxpayers money covering risks taken by large banks.

The mantle of largest mortgage provider in the
UK is expected to switch from
Halifax to Abbey as the latter releases its trading figures this week. The figures show that in the first six months of the year Abbey provided more than 25% of British mortgages. 

Abbey also unveiled a 16% rise in total mortgage lending, but said it had done so by making lower-risk loans. 

Abbey is owned by Spanish bank Banco Santander, which agreed to buy Alliance & Leicester earlier this month.  

Banco Santander said its
UK business had made a profit of 627m euros ($985m; £496m) in the first six months of the year, a rise of 4.4% compared with the same period a year earlier.  

Overall, the group made a pre-tax profit of 6.1bn euros in the first half of the year, up from 4.1bn euros in the first six months of 2007.

The figures from
Halifax are not due out until next week but are expected to show a slowdown in mortgage lending in keeping with the credit crunch conditions.