Bank bailout was "right thing to do" - commercial mortgages

28 October 2008

The government's bailout of UK banks was "definitely the right thing to do" as it has reduced the risk of a major slump, it has been claimed.

However, more action may be needed to re-stimulate the commercial mortgages market, according to Ed Stansfield, a property analyst from Capital Economics.

He noted that the government's support package, which was designed to inject extra liquidity in order to encourage banks to resume lending to each other, was vital "compared to the alternatives of allowing the banks to flounder".

But a recession is inevitable and rather than trying to revitalise the economy as a whole, leaders should focus on "avoiding the worst case scenario," he claimed.

Earlier this month, ministers unveiled details of a rescue package for banks that was aimed at protecting savers, businesses, borrowers and depositors.

By ensuring that banks had the funds to maintain lending levels, it was hoped that some stability could be achieved in the financial markets.

The Bank of England also decided to cut interest rates on October 8th, prompting several lenders to lower their mortgage rates.