£50 billion plan could take to kick in

According to a recent report the £50 billion mortgage rescue plan from the government could take some time to kick in, which means that in the meantime mortgage could remain expensive and could continue getting more expensive, further impacting on the slump in both the mortgage and the housing markets in the UK.

The rescue plan will allow lenders to exchange mortgage assets for government bonds, which it hopes will increase confidence amongst lenders and will lead to more accessible and affordable inter-bank lending to increase liquidity in the mortgage markets.

However, lenders have warned the government that the plan could take time to take effect, with one official stating: ‘For now, mortgage pricing will remain high. If anything, it will increase in the short term.’ An official from the Treasury added: ‘We expect to see an impact but over time.’

The Council of Mortgage Lenders stated: ‘In the short term the trend of increasing prices and products being removed from the market is not going to be reversed. As and when the banks start lending to each other, the rate for lending will go down and that means that that will start to bring the price down but it is not going to be a dramatic reversal. It is going to be a slow process at best.’