The Government and businesses must adopt a two-pronged approach to deliver both short and long-term solutions to the housing crisis, the CBI has said.

In its report,Unfreezing the housing market,the UK's leading business group says boosting housing activity could be a major game-changer for growth and economic recovery. And a well-functioning housing market is a critical precursor to long-term economic health.

The CBI is calling on the Government to rise to the twin challenge with a two-pronged solution, which will get the housing market moving in the short-term, and help tackle structural failures to ensure long-term stability.

Short-term recommendations include introducing a Mortgage Indemnity Guarantee (MIG) insurance scheme to enable first-time buyers to take out low-deposit mortgages, and allowing them to access savings locked up in their personal pension pots to boost their deposits.

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Recommendations for the longer-term include reducing the regulatory drag on house builders, ensuring that the planning system is pro-growth to make the building of more new houses possible, and reviewing Stamp Duty.

John Cridland, CBI Director-General, said: "We have to do more to give our young people hope in the future and support their aspirations to be home-owners. While we would not want to see a return to overly-risky lending practices and unsustainable personal debt levels, it is important that we get credit flowing to those who need it most.

"We could reduce the risk of higher loan-to-value mortgages if the Government encouraged lenders to take out insurance against the borrower failing to meet payments.

"We can also jump-start the housing market by allowing first-time buyers to boost their deposits by borrowing their own pension savings, and ensuring existing owners who want to move house have more options. It's also crucial that the Government presses ahead with relaxing some planning rules for "change for use", particularly from commercial to residential.

"Owning a home has been a natural aspiration for generations of Britons since the 1950s, and should not become the preserve of a lucky few. Without a steady stream of first and second-time buyers, the housing market freezes and the whole economy suffers."

(CD)