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Chancellor Backs Bank of England’s £50 Billion Plan

Chancellor Backs Bank of England’s £50 Billion Plan Chancellor Alistair Darling has backed a £50 billion plan by the Bank of England to make lending easier for banks hit by the credit crunch.

Under the scheme, Britain’s banks can swap their mortgage debts for guaranteed government bonds, with the aim of bringing greater liquidity to the credit markets.

Mr Darling said that the swap would "help resolve" problems the market problems and improve the situation for potential borrowers.

He told MPs that the measures would mitigate the "increasing cost and declining availability of lending by banks and building societies".

The move is primarily aimed at making things easier for would-be homeowners, but the resulting increase in liquidity should also make it easier for banks to make other loans and alleviate the problems of those looking for debt cures.

Banks hailed the move, with chief executive John Varley calling it “both innovative and substantive".


One of Britain’s largest lenders, Abbey, has already cut rates on some deals. It responded to the Chancellor’s news by cutting its two-year tracker and flexible mortgages by 0.1 per cent.

Abbey also said that the plan will eventually reduce the interest rate at which banks lend to each other - a fundamental cause of the credit crunch.


The British Bankers' Association (BBA) also said that the Bank of England’s move should restore confidence on the money markets and that this could eventually lead to better deals for British borrowers.

A spokesman said, "The banks are participating in this arrangement and expect it to make a significant contribution to alleviating the pressures in the UK money markets.

"Restoring confidence in the wholesale funding market will strengthen the financial system and the stability of our economy."

Loan News posted on 25 April 2008

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