Mullucks Wells
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Bank Bail-Out - "A Cautious Welcome"
Under the move, banks will be able to swap potentially risky mortgage debts for secure government bonds, helping to inject liquidity back into the system.
William Wells, Founding Director of Mullucks Wells said: "This should be good news for homeowners, good news for the financial sector and good news for the economy as a whole. In theory, the scheme should meet banks' demands for longer-term loans, encourage them to lend to each other again, and make them more willing to lend to people applying for mortgages. In fact it might be an initiative like this which prevents the crisis in the banking markets from turning the UK's economic slowdown into a recession."
However, William Wells also explained that the liquidity boost would not automatically reverse the recent trend for higher mortgage costs.
"Not all mortgage lenders will get direct access to the new funds," he added. "Many smaller building societies and specialist lenders are not included. So it remains to be seen whether lenders can bridge the gap between how much consumers want to borrow, and how much funding is available this year. Until we have more details, it's very much a case of ‘watch this space'!"
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