The governor of the Bank of England, Mervyn King, recently announced that the central bank is injecting a total of £11 billion into the banking sector in order to try and increase liquidity, with this total being made up of £6 billion that was previously pledged and an additional £5 billion that the Bank of England has decided to inject into the banking sector. The move comes after calls from banking and mortgage industry professionals to loosen up the money markets and increase liquidity through increased cash.

Michael Coogan from the Council of Mortgage Lenders had previously expressed concern over how banks and lenders would manage to fulfil demand for loans and mortgages given the problems that most are having when it comes to securing finance on the wholesale markets to fund their lending.

Coogan recently stated: “We have entered a substantially slower phase in the housing market and there will be ongoing problems in the mortgage funding markets unless the Bank of England makes new, broader based attempts to improve levels of liquidity in the UK. Demand for mortgages remains strong but cannot be fully met from existing funding.”

In February mortgage lending dropped by 7% compared to January and by 6% compared to February of last year. Many lenders have had to change their lending criteria, with some increasing interest rates or taking various mortgage and loan products off the market in order to minimise risks to themselves.

Coogan added: “As credit conditions change markedly from day to day, lenders will continue to rapidly adapt their products and pricing to match. This is a vital response to the uncertain conditions.”

Recent additions:

• Are HIPS a waste of time?
• Regions of England and Wales see property prices slump
• Industry expert predicts 20% fall in house prices over two years
• Impressive figures on buy to let mortgages
• Many first time buyers facing soaring mortgage rates

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