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Starting as early as next month, the scheme would see the type of guarantees given to Northern Rock extended to home loans, reports the Daily Mail.
City banker and former Halifax chief Sir James Crosby is currently undertaking research into the ways of reviving the mortgage market for the government.
A Treasury insider commented: "One major problem is a lack of mortgage finance, so if there is anything we can do to help with that we should think about it."
The source added: "If Sir James comes back with something credible that doesn't expose the taxpayer to too much risk then we would be wrong not to consider it."
According to the Financial Times, the Council of Mortgage Lenders is urging the chancellor of the exchequer Alistair Darling to make an early announcement on whether the Bank of England's mortgage market unblocking scheme will be extended beyond October.
