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Darling tells banks to help borrowers

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Date: Tuesday 22 Apr 2008

LONDON (ShareCast) - An emergency meeting called by Alistair Darling and Housing Minister Caroline Flint is expected to have seen the pair tell major banks to do more to help struggling homeowners .

The chancellor wants lenders to pass on interest rate cuts to customers in an effort to prevent the number of repossessions from soaring to levels seen during the housing crash of the early 1990s.

Yesterday, the Bank of England confirmed details of a £50bn plan to swap bank mortgage debt for government bonds to ease the impact of the credit crunch on the housing market.

Borrowers should receive the benefits of the cash injection, says Darling, many of whom are preparing to arrange new mortgages as their cheap fixed rate deals come to an end.

Last month, the Council of Mortgage Lenders revealed that the number of UK homes repossessed in 2007 leapt 21% to 27,000. The Lib-Dems reckon 60,000 homes are at risk.

Darling said the central bank’s move was an “essential step in trying to get the financial market stabilised. That in turn will help the mortgage market too.”

The mortgage market has stalled in recent months as the credit crunch has stopped banks lending to each other.

As a result, mortgage lenders have severely reduced the amount they lend, stopped lending altogether in some cases, or else put up interest rates to choke off demand.