Illiquidity in credit markets is the major issue facing lenders rather than lending quality, according to the Council of Mortgage Lenders (CML).
Earlier today, the FSA, HM Treasury and the Bank of England released a joint statement saying an emergency loan to Northern Rock does not indicate the company is likely to become insolvent.
The Bank of England says: “The FSA judges that Northern Rock is solvent, exceeds its regulatory capital requirement and has a good quality loan book.”
The CML says savers and borrowers can be confident that Northern Rock does not have any underlying business problems.
Michael Coogan, director general of the CML, says: “The Bank of England would not have provided the loan to Northern Rock if it had concerns about the quality of the lender’s own business.”
“Lenders are facing funding pressure at the moment, and what they need is a return to more normal market conditions as quickly as possible”, he adds.
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