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£50bn Lending Boost
The Bank of England has agreed to put money into the struggling mortgage market. It aims to prevent the credit crisis from causing more damage to the economy.
The Governor of the Bank, Mervyn King, said that the scheme aimed to improve liquidity.
The scheme will allow banks to swap out their "high quality" mortgage debts for Government securities. This swap would initially be for a period of one year, with the option to extend the term for up to three years total. The swap cannot be used to finance new lending.
Bank's have welcomed the new proposal and have said they were confident the move would help. Banks in the UK have become hesitant to lend to each other resulting from the credit crisis. The proposal should free up bank balance sheets and allow them to lend more to customers.
There are concerns that despite improved liquidity banks will still be hesitant to lend while the housing market is in its current state.
Tags: finance, lending, Government
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