Deadline For Liquidity Scheme Postponed
Following the onset of the credit crunch last year, many of the high street banks and building societies in the UK have been struggling to maintain sufficient levels of cash to support their liquidity requirements and earlier this year, the Bank of England launched its special liquidity scheme, which was aimed at offering support to the banking sector and propping up the mortgage and home loan markets.
The special liquidity scheme was launched in April this year, when the Bank of England pumped an additional £50 billion into the banking sector. The original plan was to allow the scheme to run for a period of six months, which meant that the expiry date was the 21st October this year, when the funding would have to be repaid.
But following the recent problems which the financial markets have suffered this week, following the collapse of Lehman Brothers investment bank in the US and the negative effect this has had on the stability of stock markets around the world, particularly affecting several financial institutions and loan providers here in the UK, the Bank of England has extended the scheme until the end of January next year, to allow markets time to settle down.
Many experts have welcomed the news and claim that the bank has taken the right action to help support the mortgage and loan industry.
Michael Coogan of the Council of Mortgage Lenders (CML) said “Its action should help promote stability at a time of uncertainty and we would urge the Bank to continue to show flexibility, given that the market conditions will remain challenging next year.
Immediate prospects for an improvement to the operation of wholesale mortgage funding markets has not been helped by the recent tightening of liquidity in response to more widespread financial market uncertainty. The removal of constraints to mortgage loan funding remains an important requirement fore any longer term recovery in the housing market.”
