Product category:
Mortgages / Housing
News Release from: Motley Fool | Subject: Mortgages
Edited by the Insidemoneytalk Editorial
Team on 23 April 2008
Fool.co.uk warns borrowers to keep their
guards up
The Bank of England's collateral swap will only delay the inevitable not eliminate it
David Kuo, Head of Personal Finance at Fool.co.uk, says: "The Bank of England's scheme to allow high-street lenders to swap mortgage debts for secure government bonds will only provide temporary respite for borrowers "Under the scheme, lenders can swap £50 billion of risky mortgages for Government securities to help free up blockages in the mortgage market
However, £50 billion represents less than 5% of total mortgage lending, and banks are unlikely to relax their recently self-imposed stringent lending rules.
"The Chancellor may be keen to use taxpayers money to nationalise mortgage risk, but banks are answerable to shareholders, not to taxpayers.
Consequently, borrowers will need to demonstrate that they are good credit risks if they want the best interest rates.".
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