Bank to rescue mortgage lenders

Bank ‘to rescue mortgage lenders’

In a bid to help the shrinking credit mortgage market, The Bank of England has come forward to help. This is in the face of warnings from lenders that a crop of small time providers can initiate problems.

The Financial Times, reports that the Bank has been working towards freeing the much in trouble mortgage market in UK, by reliving lenders off their mortgage loans.

The government has been warned by lenders that before implementing the plan, it should consider stopping a host of small time lenders from offering mortgages. With this only the larger and more capable ones can exist.

After Tuesday’s talks with bank honchos, Gordon Brown indicated that he had no problem in intervening to regulate the system, if the banks served the first time buyers and those with not too good a credit rating.

Reportedly, the Bank’s plan would want to exchange securities that are now powered by UK mortgages in lieu of Government bonds till a period of 1-3 years.

This scheme of the Bank might not include mortgages fixed after December last year. This is done so that new lenders are not encouraged and the average taxpayer isn’t at risk.

In talks with banking heads of Lloyds TSB, Barclays, HSBC, Royal Bank of Scotland and Nationwide, the Prime Minister discussed solutions to the credit cut phenomenon witnessed globally.

The “next steps” necessary to stabilize downward property prices and regulate the cost of borrowings, were discussed, quoted number10.

With base rates at 5%, bank chiefs are requested to ease out last weeks 0.25% interest rate cut by Mr. Brown.

With soaring wholesale market costs, lenders like the nationalized, Northern Rock Bank – haven’t passed the proposed cut.

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