What the government did yesterday is unlikely to have much effect on house prices as it does not really address the supply side of either mortgages or housing. The market believes prices will go down, so they are likely to go down.
Prices will continue to fall until lenders are able to satisfy demand for mortgage finance, so it will be the recommendations of the Crosby review that will have more bearing on the market than any politically motivated policy announcements. However these recommendations must create policy to help the banks do their job, which is to lend money. The government should not become a lender itself as you can guess what will happen to billions of pounds of taxpayers money if it does.
The number of people wanting to move into housing can measured in hundreds of thousands, whereas the number of properties created by the government scheme runs into tens of thousands if we are lucky, so it does not really address the supply issue either. Still on the bright side there is demand for housing, it just needs to be met.
