14th December 2010
Shaun Richards, Notayesmanseconomic's Blog
The UK mortgage market is in danger of a new type of credit crunch and indeed it appears that it has been suffering from it over the past two months. To explain this we need to go back to the height of the initial effects of the credit crunch back in 2008. At this time one of the ways the Bank of England supported the banking system was by introducing what became known as the Special Liquidity Scheme. In the Banks words, this is what it did:
"The purpose of the Scheme is to finance part of the overhang of currently illiquid assets by exchanging them temporarily with more easily tradable assets. The banks can then use these assets to finance themselves more normally."