/24-7PressRelease/ - LONDON, UK, May 02, 2008 - Chancellor Mr Alistair Darling will ask the industry to find ways to prevent those in trouble from having their homes acquired.
This follows his backing of a 50bn Bank of England plan to allow banks to swap mortgage debts for government bonds to help them during the credit crunch period. The global credit squeeze has made mortgages harder to find and higher in cost.
The interest rate at which banks lend to each other has been rising, which has seen banks toughening up their lending terms even though official interest rates of the UK are falling. There is specific concern about homeowners coming to the end of deals related to the cheap fixed-rate. Most of them will face much higher monthly bills at a time when food and fuel costs are already stretching household earnings. The figures from the Council of Mortgage Lenders last month showed the number of people whose homes were repossessed last year in the UK rose by 21%, which is the highest for past eight years.
Mr Darling, while airing his views about the Swap scheme, stated that the Bank's intervention was necessary because money markets were not "functioning properly" and were beset by a "lack of confidence" despite billions of pounds in liquidity being pumped into the system.
These measures would help alleviate the "increasing cost and declining availability of lending by banks and building societies" he added. According to the Chancellor, under this plan, the banks will be allowed to swap mortgage debts for the securities of government. He stated that the swap scheme, starting on Monday, will be for a period of one year and may be renewed for a total period of three years.
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