UK 'may unveil' rescue package
The UK authorities could announce as early as next week the details of a plan to ease tight conditions in the mortgage market, a source said yesterday.
Pressure has been growing on the government and the Bank of England to do more to ease a lending squeeze that is threatening to drive the United Kingdom into an economic slowdown.
Mortgage lenders have already warned lending could halve this year and, with elections due by May 2010, the Labour government is desperate to avoid another bank falling foul of the credit crunch after Northern Rock was nationalized last month.
Prime Minister Gordon Brown's popularity has slumped since taking over the reins from Tony Blair last year as voters begin to question his reputation for sound economic stewardship.
"It could come as early as next week. We're working closely with the Bank of England on this," the source told Reuters, on condition of anonymity.
"This is a high priority, but the important thing is that we get the details right, and we're focusing on that."
The pound rose on the news as speculation has been growing that the plan will allow banks to temporarily swap mortgage-backed securities for government bonds to help free up their balance sheets and allow them to lend more to consumers.
That could ultimately mean the Bank of England may not have to cut interest rates as aggressively as markets have been betting on. The United States announced a similar scheme last month.
Banks have grown reluctant to lend to each other because of fears of toxic debt that may be lurking on balance sheets. They have also been raising mortgage rates even though official UK borrowing costs have fallen three times since December.
Agencies
(China Daily 04/18/2008 page17)
