Bank to swap £50bn bonds for mortgages
Updated on 19 April 2008
The Bank of England are planning to swap £50 billion of bonds for high street lenders' mortgages, it has been reported.
In a bid to ease the credit crunch, the one-year government bonds would be offered to fill the high street banks' gap in funding.
The Treasury said the £50 billion figure was "speculation" but added that Chancellor Alistair Darling and the Bank's governor Mervyn King were working to help the market return to normality.
Labour's John McFall, chairman of the Commons Treasury Select Committee, backed the move but conceded it was a risk.
He said: "I think it's something that is necessary. If we don't have this what this will mean is that the whole mortgage market and perhaps the real economy will freeze up."
A Treasury spokesman said the Chancellor and Prime Minister Gordon Brown had made it clear that it was important to get the secondary market - the trade in securities - functioning normally.
He said Mr Darling had met Mr King, but "we are not at the stage where we will be making any announcements".
The spokesman added: "The Chancellor sees the need to ensure that the secondary market returns to functioning normally.
"How we do that is something that we are working on."
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