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Central bank gives markets a kick

Britain's central bank has sought to ease the liquidity crisis affecting global markets.

The Bank of England has made £10 billion in three-month loans available in a bid to help financial institutions get access to credit.

The nervousness gripping the markets has left banks unwilling to lend to one another, pushing up the intra-bank lending rate while the base rate set by the Bank of England has been heading in the opposite direction.

As a result, borrowers have seen rates go up and new restrictions imposed as lenders seek to limit their exposure.

"We welcome news that the Bank of England is extending its £10 billion offer of three-month loans against a wider than normal range of collateral," Richard Farr, director of the Association of Mortgage Intermediaries (AMI).

"Although not a long term solution to the liquidity crisis we agree with the Bank's view that the 'continuing elevated pressures in short-term funding markets' are very real, are causing significant pain to the lending industry and are having a subsequent knock on effect in the housing market."

According to the Financial Services Authority (FSA) 1.4 million people will come off fixed rate mortgages this year, with many facing a sharp rise in their repayments.

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