George Osborne unveils big plans to boost mortgage and small business lending.
The government has unveiled a £100bn package of support aimed at helping banks increase lending levels and protecting the UK economy from the worsening crisis in the Eurozone.
Speaking at his annual Mansion House address in the City of London, the Chancellor George Osborne unveiled two catalystic plans which he said would “deploy new firepower to defend our economy from the crisis on our doorstep”.
The scheme will cut banks’ funding costs in exchange for lending commitments. Osborne says the new scheme could support up to £80bn of new loans.
Osborne said the scheme will offer “lending to the family aspiring to own their own home” alongside loans for businesses looking to expand.
Osborne said: “The Government – with the help of the Bank of England – will not stand on the sidelines and do nothing as the storm gathers.We are rolling up our sleeves and doing everything possible to protect British families and firms.”
The funding for lending scheme will provide funding to banks for an extended period of several years. The rates will be below current market rates and linked to the performance of banks in sustaining or expanding their lending to the UK non-financial sector.
Bank of England governor Mervyn King said: “The Bank would lend, as in its existing facilities, against a much greater value of collateral comprising loans to the real economy to protect taxpayers.
“But the long term nature of the lending and its pricing mean that the Bank could conduct such an operation only with the approval of the Government, as offered by the Chancellor earlier. So such a scheme would be a joint effort between Bank and Treasury.”
King suggested the funding for lending scheme could be in place within a few weeks.
Treasury select committee chair Andrew Tyrie says the proposals look “very encouraging”.
He says: “These are exceptional circumstances. They require exceptional measures. The measures look as if they will encourage lending to businesses by ensuring liquidity is more easily available. It is not just welcome that the Treasury and the Bank of England are working together to secure recovery. It is essential.”
Loading ...