Mortgages -
Banks look to offload mortgage debts - 24/03/2008
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Britain's leading banks are trying to get the Bank of England to buy Billions of pounds of mortgages from them in a bid to offload crippling debts.
The move, that is backed by many of the major high street banking players, would restore confidence to the money markets in the short term. This is because more money would be freed up to allow greater liquidity in the mortgage market, preventing a more long term and unsustainable problem of a crash in housing prices.
This action to buy home owners' mortgages has already been taken by the Federal Reserve in America and the European Central Bank. The Federal Reserve was able to pump an extra £99 billion into the economy last week by resorting to such methods.
The Bank of England met with executives on Friday and confirmed that it was looking at a number of options. It would be keen to avoid buying the mortgages as taxpayers money could again be at risk if the loans went bad. If the bank does not find the extra liquidity, interest rates could rise in the future, making mortgages harder to pay off.
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