Despite the government getting tough with the banks bailed out with tax payers money, the chances of getting them to start lending money to kick start the economy look pretty slim. The chancellor, in desperation has taken a fresh look at the nationalised bank Northern Rock to come up with a plan B.
Since being nationalised Northern Rock has managed to repay a large chunk of the £25billion government emergency loan, having reduced the sum outstanding to under £9billion at the end of 2008. Perhaps with that progress in mind, Alistair Darling has announced that the government will inject more funds into the bank to try to unlock lending and stimulate the economy from recession.
Northern Rock has confirmed that it will increase it’s lending by £14billion over the next two years in line with the government proposals, but warned borrowers that there would be no return to the days of 100% (plus) mortgages that caused the financial crisis, with maximum lending set at 90%.
The chancellor, obviously embarrassed by the failure to get bail out banks lending, said in a BBC interview:
“It is best to look at this as one of a series of measures we are taking to try and rebuild the banking system for the future, I want to ensure that when we come into the recovery phase, the money is there for businesses, the money is there for people who want to buy homes.”
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