Darling meets lenders over crunch
Chancellor Alistair Darling is meeting mortgage lenders to discuss ways to help homeowners to survive the credit crunch.
The Bank of England on Monday unveiled a £50 billion scheme to tackle the credit crunch by allowing banks and building societies to swap their riskier mortgage-backed assets for safer government bonds in a bid to kick-start crippled money markets.
Mr Darling told MPs he will meet the Council of Mortgage Lenders to discuss the new scheme.
He added: "In the light of everything we are doing with them, I want to discuss with them how they can pass on the benefits of falling interest rates as well as wider Government support to mortgage holders."
Bank of England Governor Mervyn King said the new arrangement was necessary to boost liquidity, restore confidence in the banking system and "protect the rest of the economy" from the credit freeze.
Mortgage lending has fallen to historic lows since the start of the crisis last summer, with falling house prices threatening a wider impact on the UK economy.
The Bank of England has slashed interest by 0.75% in the past five months, but many lenders have actually upped the cost of borrowing this year to repair balance sheets holed by losses on mortgage-backed investments following problems in the US housing market.
The asset-swapping scheme was criticised in some quarters as a bail-out exposing taxpayers to losses in the event of another Northern Rock-style banking collapse.
Liberal Democrat Treasury spokesman Vince Cable called for banks who have suffered losses to raise their own capital through rights issues - following the example of the Royal Bank of Scotland, which is expected to ask shareholders for billions this week.
Mr Cable said: "If banks are going to receive support from the Government, it must be conditional. Banks and their shareholders must bear the brunt of previous bad lending, not taxpayers."
