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BoE pumps in extra £5bn to keep loans flowing

The Bank of England has announced that it is pushing a further £5 billion into Britain's money markets in a bid to stave off economic problems.

Current economic uncertainty, fuelled by the recent global credit crunch, is causing many banks to withdraw home loans and the Bank of England (BoE) is now providing its first emergency injection of liquidity into the banking system since September 2007.

Analysts are predicting that a global credit crisis could be on its way following an emergency buyout of troubled US bank Bear Stearns by rival JP Morgan, which dramatically affected financial markets in Europe and Asia.

The three-day funding from the Bank of England is intended to prop up money markets and reduce overnight interest rates until the bank conducts its scheduled weekly refinancing operation this Thursday.

"This action is being taken in response to conditions in the short-term money markets this morning," the BoE said in a statement. "The bank will take actions to ensure that the overnight rate is close to bank rate."

A number of UK banks and building societies have withdrawn home loan offers over the past few weeks and raised their rates in response to the global credit crunch, as it becomes more expensive for them to raise loans from other banks.

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