From Robert Peston’s blog
Five-year taxpayer help for banks

• Robert Peston, 16 Dec 08, 08:23 AM

Robert works for the BBC and had been the financial reporter who first reported a number of significant UK financial stories. Some will claim that he has direct access to the Labour government.

In a report released on the date above Robert indicates that the UK Treasury expects inter-bank lending to be stuck or dysfunctional for five years. As the UK government is a large sake holder in multiple UK banks this matters a lot to the UK taxpayers. It is also a strong reason why the UK mortgage market has dropped by 50% to 75% in a year depending on how you measure the volume (by unit, by cash value, etc).

As a UK property investor the issue cuts both ways. Interest rates are dropping fast so those on tracker or SVR loan terms are benefiting. New borrowers are largely locked out so the demand for rentals should remain strong compared to periods when everyone who wanted a loan could get one. The lack for financing and buyers being scared is not good for home values. Those in for the long term have less to worry about.

Here is the link to the full story.

Tags: Interbank lending, Wholesale banking