Bank of England to unveil £50 billion bailout

Source: Exec Digital UK

Date :21/04/2008 09:21:14

The Bank of England will inject £50 billion in an effort to prop up the ailing housing market.

The Chancellor, Alistair Darling, will today tell MPs that the Bank of England is to allow lenders to swap hard-to-trade mortgage-backed securities for government-backed bonds in an attempt to restore confidence and ease the effects of the credit crunch.

The initial offer is for £50 billion worth of bonds, but senior sources told The Times yesterday that further cash injections up to a total of £100 billion were possible.

Stabilising the market

Mr. Darling said that the latest move was intended to “ease” the housing market.

“We believe that this will be an essential step in trying to get the financial market stabilised. That in turn will help the mortgage market too,” the Chancellor said.

However, not everyone is in support of the move. “We cannot have a situation where the banks are able to privatise their profits and nationalise their losses,” Vince Cable, the Liberal Democrats’ Treasury spokesman, said.

Mortgage lenders

The Council of Mortgage Lenders said that more detail was needed before it would become clear how much mortgage lenders would benefit.

Michael Coogan, director-general, said: “It is still not clear if specialist lenders or smaller lenders who do not have mortgage-backed securities will be involved.

“Also, we will have to wait and see what the rates on the Bank’s loans will be, and how these funds will then be recycled into the mortgage market through pricing and products.”

April 21, 2008