Alistair Darling yesterday promised measures to breathe life into the ailing mortgage market amid fears that the UK was heading for a housing slump.

In a surprise intervention on the eve of today's interest rate decision by the Bank of England's Monetary Policy Committee, the Chancellor announced he would consult on measures to lure investors back to the credit markets, which provide funding for banks' loans to homeowners.

Mortgage lenders have found it increasingly difficult to access capital from the markets since the fallout from the sub-prime crisis in America. The drying up of the wholesale markets is making it tough for lenders to offer competitive rates to borrowers.

But the Government plans to introduce a new ratings system to try to reassure investors that the securities on offer from UK lenders are good quality. This could bypass the ratings agencies, which have come under fire for failing to anticipate the collapse of the sub-prime markets.

Mr Darling said: “To increase transparency and improve investor confidence, the Government will consult on a new ‘gold standard' for covered bonds and mortgage-backed securities, which will help not just the housing market but wider economic growth in these uncertain times.”

The Government will consult on whether the standard would be self-regulated by lenders or the Financial Services Authority. Alternatively, it could be regulated by a separate independent body.

Mr Darling also moved to reassure homeowners that the UK was not heading for a housing crash, despite recent falls in house prices.

He said the UK market was different to the US market. One of the main differences, he said, was that “demand for housing outstrips supply”.

The Chancellor added that market conditions are different to those during the housing market crash in the early 1990s, with low unemployment and low interest rates.