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Mortgage Lenders Press Boe To Extend Funding

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existing scheme, drawn up by the Bank of England governor Mervyn King, has been estimated to be worth £50bn although the governor has made it clear that there is no upper limit to the arrangement. The Bank of England initially agreed to make the special liquidity facility available until October. It refuses to discuss the use of the facility until then and refused to comment yesterday.

It is not yet clear how widely used the facility has been. It allows banks to trade in illiquid mortgage-backed securities in return for high quality government bills which are more liquid and more likely to be traded on the financial markets. The scheme only allows mortgages that were in existence at the end of 2007 to be exchanged for bills, although some lenders believe that more recent home loans should be extended to the scheme.

King had told bankers that he intends to make the special liquidity scheme a permanent fixture, although there is confusion among the lenders as to what this means in practice.

In a speech to the British Bankers' Association last month, King said: "We intend to learn from the experience of the scheme to put in place a liquidity facility that works in all seasons - both 'normal' and 'stressed'." He said that the Bank was also to address the problem of the "stigma" attached to banks that use central bank's facilities.

Ben Bernanke, chairman of the US Federal Reserve, said on Tuesday that he would consider extending the emergency lending facilities put in place in the US after the near-collapse of Bear Stearns. His comments highlighted the extent of the US authorities concerns about the continuing strains in the financial markets. The Treasury has also indicated that Britain's liquidity scheme is a crucial part of the armoury to tackle the credit crunch. But some lenders are thought to be concerned that the government only wants the scheme to be used when banks are in crisis.

King has made it clear that the scheme is not a bail-out for lenders who lent too freely during the housing market boom of 2006 and 2007 nor to rejuvenate the mortgage market. Lenders who use the window pay a heavy price - known as a haircut - when they swap their mortgage assets. The haircut is a discount on the face value of the assets being exchanged for the government bonds.

Today's meeting with the market experts, the treasurers of each of the major lenders, is intended to discuss how the scheme is working three months since its launch and suggest any refinements to the arrangement.

Edit to add Link : http://www.guardian.co.uk/money/2008/jul/1...englandgovernor

Edit to add comment : The Right's issue's are not working out, HELPPPPPPPPPP!

Edited by tuggybear

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For 'borrowing' read 'free money'.

Just as in America, none of those 'loans' to banks will ever be repaid. They will roll over and over for ever. Clearly massive inflation is the choice they have made.

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Guest Mr Parry
The banks may take the money but mortgage costs won't come down.

Not only will mortgage rates fail to come down, the SLS has given the green light to inflation. These bankers will just trade the T-Bills they exchanged for bog-roll, for Commodities, the next bubble. They are using YOUR money to make YOU poor.

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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