Chancellor challenges mortgage lenders

Chancellor of the Exchequer, Alistair Darling, is meeting with mortgage lenders later today in efforts to extract the maximum benefit for homeowners of the Bank of England’s bold move to ease credit conditions with a £50 billion injection of cash.

Mr Darling’s agenda will include help for borrowers whose fixed-rate mortgages are coming to an end and for households finding it difficult to meet mortgage repayments.

The Chancellor will also be challenging banks and building societies to pass on the full benefit of cuts in the Bank of England’s base rate.

However, the consensus is that it will be some months before homeowners benefit from the Treasury’s rescue package.

The credit crisis has left many of the UK’s leading banks with concerns about their capital ratios and the need to build up their reserves.

In addition, the Bank of England’s scheme is not aimed at encouraging new lending and returning the mortgage market to its pre-credit crisis condition, when lenders were not always passing on the full cost of borrowing on the money markets.

According to a report in The Times, the £50 billion offered by the Bank amounts to less than 5% of a total outstanding mortgage debt of nearly £1.2 trillion.

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