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The housebuilding industry's main lobby group said government measures aimed at bolstering the slumping property market were positive, but called for more action to improve mortgage availability.

"We welcome today's package as a positive set of measures to assist the housing market -- and particularly the hard-pressed first-time buyer," Stewart Baseley, chief executive of the Home Builders' Federation, said in a statement on Tuesday.

"However, we still also need action to tackle the current constraints on mortgage funding. This remains a critical part of the overall picture on which the ultimate success of today's measures depends."

The government earlier unveiled a 1 billion pound scheme to stimulate the housing market by temporarily suspending property purchase taxes on homes costing less than 175,000 pounds and by providing five-year interest-free loans to a limited number of first-time buyers.

The Council of Mortgage Lenders, which represents Britain's main home-loan providers, echoed the HBF's call for action to free up mortgage lending, and said the latest measures would not have a significant effect on the property market.

"Essentially this package is directed at the blockages in the housing market for some vulnerable consumers," CML Director General Michael Coogan said in a statement.

"We continue to see the funding problems in the mortgage market as a fundamental bar to meaningful housing market recovery."

SHARES RALLY

Mortgage costs have risen sharply in the past year, driven by a sharp rise in banks' own funding costs in the wake of the credit crunch.

The abrupt drying up of cheap mortgage finance has thrown a 10-year property boom into reverse, with lender Nationwide last week reporting a 10.5 percent fall in house prices in the year to August, the steepest decline in 18 years.

Concerns over the mortgage market were heightened on Sunday when the Bank of England said it had no plans to extend a six-month scheme aimed at improving banks' access to mortgage funding beyond its expiry in the week of October 20.

Under this special liquidity scheme, banks can exchange hard-to-trade mortgage assets for highly liquid government-backed securities, easing strain on their balance sheets.

Housebuilding shares rose sharply in response to the government's housing market measures, with Taylor Wimpey up 9.8 percent at 61.25 pence and Persimmon 9 percent higher at 420.25 pence by 12.25 p.m.

Analysts said the increase reflected hopes that the measures may help housebuilders dispose of their unsold stock more quickly.

"The market's thinking that if they can turn work-in-progress into cash more quickly, it will help keep them within their banking covenants.

Shares in HBOS, the biggest UK mortgage lender, were up 1.03 percent at 320.25 pence after analysts said it could benefit from the government's scheme.

"The plan isn't particularly large, so is unlikely to have much impact, but HBOS would likely be the biggest beneficiary," Dresdner Kleinwort analysts wrote in a note.

Source:  http://uk.reuters.com/