The Government has said it would “continue to support the UK mortgage bond market” as it faces a “challenge” to keep up with the market.
The Government said the cost of the mortgage bond relief was “the single largest expenditure” of the UK budget in the last fiscal year.
“We will continue to support mortgage bonds, which are a strong and growing pillar of the economy,” the Treasury said in a statement.
It said the Government had invested in the “mixed bond market, with interest rates on mixed bonds rising to record highs”.
The Government had promised to invest £3bn in mortgage bonds over the next five years, including in the UK’s most successful bond fund, M3 Fund.
However, the Government said it had been forced to cut its mortgage bond expenditure in the first half of this year because of the “strong” and “unexpected” demand for mortgage bonds.
“The Government has already reduced its mortgage bonds programme by £1.6bn to ensure it can provide the same level of support as we have been providing for the last five years,” the Government’s Statement of Defence said.
It added that this was due to the “challenges” posed by the mortgage bonds market.
However critics said it was too late to help the market, given the Government has yet to meet its commitment to provide the mortgage assistance to all households.
“It’s too early to start to provide mortgage bonds to people and families,” said Alan Boulton from the Taxpayers’ Alliance.
“Even if the Government does take some action, there are still over 3 million households that have not had any of the help they need.”
“M3 Fund mortgage bonds are a key source of UK Treasury funding, which is a great thing, but it will need to be extended beyond the current five-year period to meet the needs of households who are struggling,” he added.
M3 fund was launched in 2010 to help small businesses and small businesses-led households to finance their mortgages.
It has become the main funding source for UK mortgages, with the majority of the money coming from the mortgage fund.
“In the past five years the M3 has delivered over £40bn in funding to mortgage bond holders, with almost three quarters coming from mortgage bonds,” a statement from the Treasury read.
“That is more than the annual budget of the NHS.”
It added: “The UK’s mortgage bond markets are resilient and will continue working together as we work through this challenge.”
The M3 is a hybrid fund designed to help mortgage bondholders to fund mortgages while providing funding to others.
It is one of the biggest and most stable investment vehicles in the world.
The fund is funded by the government, private investment funds, investors and bondholders.
“For a government to invest in a product like mortgage bonds it has to be able to guarantee that they will have a future,” a Treasury spokesperson told the BBC.
“So they have to have a good rate of return and the fund is designed to deliver this.”
The spokesperson added that the Treasury would be “making further investment decisions on the M2 and M3 over the coming months”.
The statement also said the Treasury planned to spend £2bn on mortgage bonds next year, including £1bn in M3.
This would be in addition to the £1 billion already spent on mortgage debt relief.
“M2 and other mortgage bonds have been in place for years, they are a sound investment, and they are good for the UK economy,” said the statement.
The Treasury said it wanted to keep mortgage bonds strong and to ensure they could be continued to be used for decades to come.
The government is also considering raising the retirement age for pensioners to 70 from 65.
It will also continue to offer mortgage bonds and other government financing to people who need it most, such as people who have been unable to repay a mortgage.