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21 September 2007

Borrowers will benefit from bank injection

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by Kay Mitchell

Borrowers will benefit from bank injection

The Bank of England has recently announced that it will pump £10 billion into the UK economy in the form of loans to Banks that will use mortgages and other assets as security.

According to the Council of Mortgage Lenders (CML), this is good news for borrowers. The Financial Times has said this move is surprising, particularly as Mervyn King, the Bank’s governor, has been vocal in his disapproval of such a move.

However, a spokesperson for CML has said that the support will mean conditions will return to some sort of normality for borrowers and lenders alike. CML added that this welcome support should enable 3-month funding costs to reduce and get back to normal levels.

CML concluded that this would be welcome news for lenders and their customers, especially those with mortgages linked to Libor (London Interbank Offered Rate) – these people were expecting a severe increase in payments.

Earlier this month, the CML announced that the number of mortgages taken out by first-time buyers declined by 7% in July.

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