The governor of the Bank of England has indicated that the scheme can only do so much to boost the home loans sector.
Britain's mortgage market is unlikely to recover for some time, the governor of the Bank of England has confirmed.
Mervyn King also told MPs yesterday that households would continue to face financial hardship, thanks to falling wages and rising prices. Speaking to the influential Treasury Select Committee, he added that it was unlikely that the Bank would offer extra backing to lenders so that they could provide cheaper loans to mortgage customers.
The governor made the remarks ahead of the introduction of the successor to the Special Liquidity Scheme (SLS), the deal which the Bank struck with mortgage firms back in April. SLS works by allowing lenders to swap some of their hard-to-value assets for safer government bonds, which it can then trade elsewhere in order to generate revenue.
Despite originally only intended to cover £50 billion of swaps, analysts cited by the Daily Telegraph newspaper have suggested that banks have used as much as £200 billion.
Mr King sought to downplay the transformative effects of SLS, however. "I hope everyone will understand that the proposals to be published next week, important though they are, will not and cannot solve the shortage of funding to finance bank lending, including mortgage lending," he commented.
Mortgage approvals numbers are running at around half their year-ago level, figures from the Council of Mortgage Lenders show.
