Alistair Darling has said a lack of mortgage credit is holding the housing market back.
The chancellor announced construction firms would get £500 million of extra finance to build new homes, and the armed forces would receive £50 million to make home improvements.
He also said the scheme to guarantee mortgage backed securities would be used to help boost lending, particularly for first-time buyers, and an extra £80 million would be put into the shared equity mortgage scheme.
Peter Rollings managing director of estate agent Marsh & Parsons, said: "The government needs to think long term – sticking plaster over sticking plaster isn’t going to heal a wound that needs stitches.
"Crucially, demand for mortgages is there – it’s full to bursting. The banks just haven’t been able to lend. The government guarantees for new mortgage backed securities should offer lenders new finance to fund new lending to take the cap off pent up demand."
Good news also came for the environment as the chancellor announced £100 million for local authorities to build energy efficient homes.
Mark Blackwell, sales director at property and mortgage outsourcing specialist Xit2, said: "The budget announcement that new mortgage backed securities will be underwritten from today should reopen wholesale funding markets for good quality lending.
"Those at the property market coal face tell us demand to buy property is there – we hope these measures will have a noticeable and quick impact on the volume of lending lenders are capable of."
However, the Federation of Master Builders (FMB), has said the chancellor's announcement has not gone far enough for the beleaguered construction sector. Brian Berry, director of external affairs at the FMB said: "The chancellor had an opportunity today to invest in our housing but instead has offered a lukewarm package of financial measures that will do little to increase the housing supply or to make our homes more energy efficient.
"The amounts on offer of £500 million to support the construction industry and kick start stalled construction projects of new homes, coupled with the £100 million for local authorities to invest in energy efficient improvements are a drop in the ocean."
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