King eases situation for banks

Mervyn King, the governor of the Bank of England, has recently issued the UK's banking industry with some good news, informing officials that the central bank is set to inject extra funds into the banking industry in order to increase liquidity and make it easier for the banks to issue mortgages and loans to consumers. Since the credit crunch swept across the country it has become increasingly difficult to get finance, and this is because banks themselves are struggling to get finance to fund their lending. This in turn has led to stricter lending criteria, fewer loan and mortgage products being available, and higher costs for both banks and consumers.

The Bank of England had already said that £6 billion would be injected into the banking industry in order to ease the situation when it came to lending. However, grave concerns have recently been expressed by both the Council of Mortgage Lenders and the British Banker's Association, with both agencies calling for the Bank of England to take action in order to improve liquidity for UK banks. Just a day after malicious rumours were started about HBOS facing a crisis similar to that experienced by Northern Rock last year – rumours that both the Bank of England and HBOS have confirmed are untrue – the central bank has pledged a further £5 billion to the banking industry.

An official from the Council of Mortgage Lenders had recently stated that unless something was done to ease up the money markets the mortgage industry would continue to experience more and more severe problems, stating: "We have entered a substantially slower phase in the housing market and there will be ongoing problems in the mortgage funding markets unless the Bank of England makes new, broader based attempts to improve levels of liquidity in the UK. Demand for mortgages remains strong but cannot be fully met from existing funding."