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鈥淎pril is the cruellest month,鈥� runs the first line of T.S. Eliot鈥檚 epic modernist poem about sense and meaninglessness, The Wasteland. Now he wasn鈥檛, in 1922, writing about the housebuilding industry, but right now, that is what it feels like.

In the last month a market downturn based upon a mini-crisis of consumer confidence in house prices following Northern Rock, has turned in to something much more serious as mortgage lenders rushed to exit the sector.

Much of this has been written so many times it bears little repeating 鈥� mortgage lenders worried about over-exposure to securitised debt have been competing with each other to offer the deals least likely to attract new customers, consequently reducing the number of products on offer to potential homebuyers from almost 8,000 to under 4,000 since the start of the year, according to Moneyfacts.co.uk.

It is now nigh on impossible to buy a house with less than a 10% deposit, a situation that has immediately priced a huge chunk of potential buyers out of the market. That this would have a serious effect on prices is just a matter of common sense, and last week鈥檚 statement by housebuilder Persimmon is the first reaction to that.

The housebuilder, which built almost 16,000 homes last year, said it will not start any new sites until the market improves 鈥� affecting about 30 separate sites between now and June, more if the moratorium continues beyond that. And while all in the sector welcome the Bank of England鈥檚 attempt to re-introduce liquidity into the market by offering to swap mortgage secured debt with 拢50bn of government bonds, no-one thinks it鈥檚 going to have an immediate impact.

Now that the government has control of Northern Rock, is there a case for allowing it to offer deals

Given that, we鈥檙e going to have to expect a lot more bad news from housebuilders in the months to come, with Barratt in particular scheduled to provide an update in two weeks time.

All this bad news is leading some to ask whether more governmental action is required, unless they want housebuilding levels this year to fall to the disastrous 110,000 predicted by Persimmon鈥檚 chief executive last week. Now that the government has control of Northern Rock, is there a case for allowing it to offer deals to the customers left high and dry by the mortgage market retreat?

So far its new boss, Ron Sandler, has said he will do everything possible to avoid gaining new customers, in order to reduce the bank鈥檚 risk. The bank has withdrawn more that two thirds of its products and has the highest standard variable mortgage rate of all the major lenders. But is there a point at which government鈥檚 other policy priorities 鈥� such as keeping up the supply of housing and avoiding the recessionary impact of a sharp fall in house prices 鈥� mean it has to revise this view of Northern Rock鈥檚 role?

In the words of Roger Humber, strategic policy consultant for the House Builders Association, 鈥渋t is extraordinary that the government should be compounding the problem we have by effectively stopping Northern Rock lending, thereby taking one of the largest players out of the market.鈥�

Any move to make Northern Rock offer a lifeline to first time buyers with competitive deals would be a serious intervention in the market by government, but there are those who think the situation is serious enough to warrant it. Such talk is unpopular with the private lenders, and any move to take on customers shunned by the open market would make the Treasury very nervous. But unless we want May to be even crueller than April, is it time for a re-think?