So the Government is affectively guaranteeing mortgage risk for the banks. Does that mean that for every normal Joe punter out there in negative equity can have that guaranteed by the Government ?
As Maggie always maintained, you can not buck the market.
If there is no spirit to invest funds into the British housing market, then let rates drift up to compensate, and soon enough money will return.
Guaranteeing an over-valued asset is no way to shore up the market .. let it find its own natural level.
The Banks are private companies that have had an easy time for decades, making profits in excess of the services they provide. Now that it is getting a little tough, and the highly paid executives and managers are now actually being tested, they run to mummy to hold onto her apron.
To have U.K tax payers money supporting the banks is pushing the risk to us all, not the bank, their staff, or their shareholders. If it doesn't go to plan, there could be a catastrophe ahead.

Joe, Geelong, VIC Australia

This is a sad day indeed. We are watching the death of Anglo Saxon capitalism in the UK and the US. This is the worst sort of crony socialism. Are those granite countertops and bank bonuses worth destroying the market discipline our prosperity depends upon?

Chris, Washington, DC USA

This is Northern Rock rescue multiplied by 20 times!

There is a very good reason why no one will touch mortgage backed securities at the moment (except Gordon “sell low, buy high” Brown) and that is because property is seen as grossly overvalued.

This is political interference of the highest order.

A Hariis, Kettering, UK

To Paulie,

The level of debt is unsustainable. It has taken a long time for the markets to recognise this, but they didn't want to whilst they were making money. What you are describing is the effects of money being more expensive to borrow, and peoples ability to pay.
Debt is now more expensive to fund so people will not be able to pay as much, prices must fall. At some point people will also realise that they will need to make provision for old age, leading to even less money to fund debt.
A fall is long overdue and necessary

AndyN, Reading,

this smacks of short termism.. transferring the debt fm the banks to Govt.. mmmm since the banks got themselves into this mess in the first place whats to stop them making a series of similar disastrous errors once they have their confidence back...and then the boe is saddled with a huge bad debt..the markets created this squeeze the Govt stepping into the ring to bail them out seems unwise even if the alternative is a corrective crash in the worlds debt based economies..we've recovered fm crashes before so this action seems to be perpetuating the bubble..can that be good in the long term?

zugerman, zurich, switzerland

How much money is the BOE going to pump nto the Fishing industry ? Or the engineering industry ? or any other industry? None. Why, simply because the ruling political elite have their dirty fingers in th BIG FAT BANKING PIE. They dont want poor dividends do they !!. Blow the taxpayers cash to save their own private honeypot. I reckon its about time for a general strike. As a worker and taxpayer i am absolutely sick of these theives stealing money from the workers of this country. The sherrif on nottingham was a hero compared to these tyranical criminals.

Trevor marshall, Looe, Cornwall

Why are all of you so bitter? So alarmist? Why are you so afraid?

The sky is cloudy, my friends. It isn't falling.

Robert, Lancaster, UK

Economic growth has been boosted enormously by the housing market, and the government are running scared if this bubble were to burst. Trying to prop it up is delaying the inevitable. Ever heard of the expression no pain no gain ?

Jonathan Clark, uckfield, sussex

Why do readers and journalists alike not realize that most of the mortgages given will be paid by people like you and me, most of the taxpayer money will be paid back with interest, and that their are inconsistent calls for banks to not be let off risk while also being asked to bring down interest rates. The BoE lending to the banks is very short term and costs nothing to the taxpayer as far as I can see. If house prices collapse by 50%, or a major commercial bank goes bust, then the economy and the very people moaning about the immorality of bailing nasty capitalists out will suffer terribly. I recognize that there are some moral hazards in all this but, if you want an economy that people can live in rather than starve in it is impossible to do otherwise in the short term. The long term is something different and an simpler but stronger regulatory environment is certainly called for.

Gedimino, Vilnius, Lithuania

I wonder if the members of the MPC have any children?For the last few years they have done nothing as they recited the mantra of no interference in the housing bubble.Now they are desperately trying to prop up house prices at super elevated levels.What hope for the aspirations of our young people to buy a property at an affordable price?The MPC has condemned an entire generation of youth to never being able to afford a house in favour of fat cat bankers.Its a disgrace Mr Mervyn King.

Rajeev, Northwood,

Another help to the banks? Isn't it time that the banks get regulated proper, so that the people (us) don't fit their bills.
I though we were already paying massive illegal charges to banks, and now because of their bad practice, we are bailing them out. Am I stupid or, we, the people are been taken for a costly run.

lauren, london, uk

aaaahhh that make perfect sense then. The Tax payer is going to take on the liability of all these poorly sold mortgages.
HHHmmm this government is great don't you think.

Spence, London, UK

Where is this going to leave sterling? and what about savers when the pound is nose dives even further against the euro.I,M not surprised so many people seem to be selling £,s.

bob, hants,

This infuriates me. The housing bubble has been chased up by banks funding mortgages based on ever increasing salary multiples. Obviously this can't continue exponentially because there hasn't been a wage price increase to match the level of house price growth. There comes a breaking point and we have now reached it. This economy is based on a quick sand of debt and Labour know it. Now they try to protect it and prolong the inevitable with tax payers' money all for political gain.

Matt Clarke, London,

This will make the Northern Rock saga look like astute financial management. The tax payer steps in to bail out the banks who through greed and incompetence have caused this mess. Stopping a correction in the housing market has more to do with Browns political ambition than what's good for the long term health of the economy.

giuseppe moschella, London, UK

So Gordon is giving ( effectively ) private companies my hard earned money while they pay bonuses and party like its 1999, the sooner this man is gone from his position and any office the better !!!

Peter, Aldershot, UK

Er, so we're going to re-badge subprime/dodgy mortgage debt as gilts, then are we?

Brilliant!

Crisis solved overnight then?

(P.S. could someone tell me what planet these purveyors of 'emperor's clothes' theory come from??)

Charles, Cheltenham, UK,

unless they do this, the banks won't lend to each other, meaning no loans for anyone. also, the drops in interest rate are what's dropping the value of the currency; it will go up again in a few months. no that it's lower than the ECB rate the value of both pounds and euros are dropping, 'cos it's more rewarding to save your money in euros. it's a downward spiral.

will, cambridge, uk

so the banks absolve themselves of risk? not very clever, i suspect some serious changes need to be implemented to restore confidence in them, perhaps the managers who oversaw this not working in that capacity again? there seems little chance of them suffering for thier failure

ben, folkestone, uk

I gambled £100,000 recently on a business venture and lost. ill the government bail me out with taxpayers' money too?

Ashvin Shah, London, UK

It is not falling house prices which slow down the economy, it is the overhang of the massive borrowing which accompanied the housing bubble. Suddenly people realize they are deeply in debt and start spending less. However, most of the people who bought in the last two years will not be affected by a price crash, because they are not planning to move. Meanwhile, new buyers and people moving home will have smaller mortgages and can therefore spend more money on going to cafes, having babies, etc. Falling prices are, overall, an economic stimulus!

Anthony, St Albans, UK

as i recall a bank is an institution that will lend you money so long as you can show that you don't need to borrow it- physician heal thyself

peter codner, devizes, england

The Indepence of the Bank of England is a joke.

The role it has been given is to control inflation yet in the face of rising oil and food prices and a 'real' inflation (bread, butter etc) of 7 or so percent they decide to try bolster an area that will cause further inflation.

Surely if they wished to offset inflation which ultimately is beyond their control they should let the housing market return to trend.

Instead it bows to obvious internal backhand pressure from Brown et al.

Oh well. The longer they push the 'envelope' the longer the recession and the longer we can be without a Labour government.

Paul Sullivan, Chester,

This and other supportive actions should have been taken long ago by this incompetent government and BoE. They have been and are risking the UK banking industry and economy by in effect giving unfair advantage to foreign banks which have been helped by their central banks. Santander for example is heavily exposed to Spanish property and construction but is nevertheless taking advantage of the UK's situation by taking 20% of the mortgage market, and its share price has climbed! Presumably it can thank the ECB but given its loans are anonymous we can only speculate (compare with the moral hazard and reckless naming and shaming/ruining of Northern Rock). Cable is first to criticise but is totally bereft of any constructive solutions. We need well-informed professionals not arrogant unknowledgeable amateurs (as we have in the government, its advisers and the BoE) making the decisions.

David, London,

Dear Mr Badger,
Spot on! Well said!

sophie, london,

I agree with all the comments here, has anyone noticed how we - the readers - consistently say we are ok with the housing bubble popping, and higher interest rates to encourage savings? and we don't want the BOE buying risky debt? This government is fanatical on supporting the debt binge to end all debt binges.

Rahul, London,

Oh dear in a free market economy we are again shifting risk from the private sector to the taxpayer. The bank sector is essential to our economy an dpivotal in our grwoth but do the banks realise this, I wonder. Let's at least have a guarantee that there will be pay freezes and much tighter realistic regulation instead of the FSA fiddling around with deckchairs

Alan, Cheltenham,

Has the government really thought this through? If lending returns to the rate it has been then the housing inflation will return. Along with the rise in cost of oil and foods, inflation will rise very quickly so the bank of england will have to massively increase interest rates and we are back to this position only a few more months or years down the line. It would soon send the pound spiralling out of control into worthlessness and take everything with it. The only way to ground everything again would be to make everything too expensive or if there were to be a global recession of epic proportions. People have quickly learnt in the age of no blame, that if you say 'I won't do that silly thing that made me loads of money again' you can do just about anything. If we all became hedge funds, we could all happily make millions but the system would quickly unravel. It's just lucky that some people have concienses, although that appears to be abaiting.

Alistair Kipling, Birmingham,

why is it with house prices spireling out of control for five years
the goverment did nothing for first time buyers . now
there is a chance they may drop to a more realitic
figure the goverment wil use all its powers to prop them up
perhaps gorden brown was not so clever after all

brian fry, competa, spain

Is this not just a case of good money after bad? I'm fed up of the government's insistence to support and promote this ludicrous bubble. The easy money that's fueled this silliness has to be paid back, if that means hard times ahead, then so be it.

Rob, Hull,

This is ludicrous - How can the BOE be so irresponsible and take on the risky assets that are the root of all these credit problems! What signals are being sent out to the banking system?...."Don't worry boy's its BAU, we'll bail you out"!

Also when is the issue of Banks P&L reporting going to be addressed? - Shouldn't banks make a clear distinction between Realized (actually earned) P&L and Un-realized P&L (theoretical guestimates of P&L based upon how banks value assets still on their books!) - don't forget most of the big bonuses are earned on the Unrealized figure. Unfortunately traders are only around for the short term, they take their bonuses and leave, whereas the risky assets/structures often tend to be long term....and as recent event have shown their valuations can break down. The whole system needs a rethink!

Mr S Paul, London,

This is just "pass the parcel" with bad debt still hanging over the UK economy. It will allow the banks to move more currency out of UK Plc and further deflate sterling. This will exacerbate inflation with dire consequences:-

Winter of Discontent
Sterling Crisis
Downfall of Government

UK Plc is living beyond its means and hiding behind a devalued currency will not cure the nations problems. A sound economy relies upon sound money, without that we are a basket case!

Steve Marchant, Broadhempston, UK

Take a deep breath and pinch your noses. Oh, and by the way, I want my taxes back!

T J, St Albans,

With this piece of news, I will exchange my Sterling for Euros even at this rather poor exchange rate as the currency will be doomed

T. Andre, London,

Dear Mr. Badger, please can you explain to a simpleton like me why it would be good for house prices to drop by 50%? Do you not realise that such a thing would spell absolute disaster for EVERYBODY in this country including those without mortgages and those desperate to get on the housing ladder. It's quite simple, really. Those of us with mortgages that would be in negative equity would not simply sell to the highest bidder and shrug off our huge losses, we would fight tooth and nail to make our mortgage payments at the expense of just about anything else. This would naturally lead to massive downturn in spending in shops which would close down and lay off staff left, right and centre. The effects of this would affect everything from cinema tickets to car sales and unemployment would spiral out of control. Before you know it we'd be witnessing financial armageddon and our lives would be changed forever. Let's stop the gloating about the housing market, falling prices hurt everybody.

Paulie, Loughborough, Leicestershire

...and while we are at it can we then reclaim the multi-million pound bonuses that were paid out to these city blood suckers that caused the trouble in the first place...if we can fine balfour beatty et al for collusion then why can't we fine these pondlife?

phil durrant, york,

Excellent news! We need a soft landing for the property market to avoid a ten year recession. Even first time buyers and people that have been priced out of the property market don't want to lose their jobs.

John, London, United Kingdom

The government is puny when measured against the market. All they can do is try to delay the pain. Mortgage and credit card debt will bring house prices down to where they were a decade ago - a drop of 50%. There's nothing that can be done about it, the Law of Financial Gravity cannot be avoided..

Richard Barber, Saltash, Cornwall

I doubt if it will work!!

Margaret Thatcher once said that you cannot buck the market. What the government is trying do may sound good in theory but in practice it is a complete humbug. It is like turning the coutry into pawn shop.

There are two issues here. 1. Over lending by the the banks and 2. over spending by the Government. America's 10 trillion $s is not helping either.

Billions of £s are being wasted on illegal wars. The legacy of that will prove very costly for the British tax payers as well as for the American tax payers. Either we bite the bullet and get out no matter whatever the consequences or pray the almighty - this will please some people.

Balwant Munglani, Northwood HA6 1ND, UK

Could any of your economic experts( not David Smith please) tell me once the banks have pawned all their bad debt for tax payers money what else can they pawn after this to try and keep the housing bubble inflated? Or is this action just delaying the big one!

Tim Walton, Leeds, England

I can't believe this that the Government in desperation now starts bailing out all the reckless lending using tax payers money. The house prices and the related pyramide investment scheme, also known as buy-to-let, is tried to be saved any cost, at least over the next elections. A sharp drop in house prices should be a healthy correction after all the easy credit and speculation that has been going on for too long.

Melville, Southampton,

I think that this is just a heavy shower to end the drought.What happens when it stops raining and all the water has been absorbed by the ground?A short- term fix for a long-term problem.

stephen hulton, eure, france

Sheer insanity. The quicker house prices drop 50% the better. Buy gold now to protect yourselves against the rampant inflation that is coming your way.

Mr. Badger, Luton, England