Battered lenders ask Treasury for more

Battered lenders ask Treasury for more

Lenders called yesterday for urgent government help for the home loans market as investor confidence in the banking industry took a fresh hammering.

In a jittery stockmarket, Royal Bank of Scotland plunged more than 10% at one stage, while banks raising cash from investors - notably Barclays, HBOS and Bradford & Bingley - were also hit. Concerns about a worsening crisis in the US mortgage market, after authorities bailed out Freddie Mae and Freddie Mac, were behind yesterday's anxiety.

The Council of Mortgage Lenders took the opportunity to call for extra help for the home loan market on top of the Bank of England's special liquidity scheme (SLS), introduced in April. It warned the Treasury that "speed is of the essence".

The SLS allows lenders to exchange illiquid assets based on mortgages issued before December 2007 for more liquid government bonds. The CML's plan is to package up mortgages written since December 2007 in bonds that would be accepted by the Bank of England as a type of secured loan.

The CML notified the Treasury of its proposal through the review of the mortgage market being conducted by the former HBOS chief executive Sir James Crosby. The Treasury said that "work on the secondary mortgage market is already considering a range of ideas such as this" and that an interim report will be presented to the chancellor during the summer.

Michael Coogan, director general of the CML, said: "A year into the credit crunch.....continued below

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there is no merit at all in waiting until the autumn before taking steps that will allow the housing market to remain more resilient and so help the overall health and stability of the UK economy."

With house sales at their lowest level for at least 30 years, Alliance & Leicester agreed to a cut-price takeover by Santander over the weekend.

A&L's shares fell 10.5p to 324.5p yesterday as rival bidders failed to emerge but much of the attention in the London market was on RBS, which has exposure to the US market through its Citizens operation. RBS shares are now 10% below the 200p at which the bank raised £12bn in a record-breaking rights issue in April.

One of its partners in that takeover, Fortis, was forced last night to deny customers were withdrawing funds as its shares plunged and the Dutch market regulator asked for information relating to recent stockmarket announcements.

After a turbulent day of trading, Barclays remained below the 282p at which it is offering shares, which means Qatari interests could end up with almost 10% of the bank when the placing closes tomorrow. The HBOS £4bn fundraising ends on Friday and its shares closed well below the 275p rights issue price at 260p, down 12p.

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