The move by the US Treasury to bail out Freddie Mac and Fannie Mae will be good news for British banks and, in turn, good news for British homeowners.

UK banks, along with financial groups around the world, have a sizeable slice of the £900 billion in mortgage-backed bonds that Freddie and Fannie have issued. Worries about the quality of the mortgages linked to those bonds meant that their value had been written down. By stepping in to guarantee these mortgage-backed bonds, the US Treasury has turned them overnight from poor quality to top quality, giving them an uplift in value.

The UK banks that hold these bonds will see an instant improvement in their balance sheets that will allow them to ease the restrictions on their mortgage lending. More money for home loans will help to reduce the severity of the mortgage drought and, as more money becomes available, greater competition should help put downward pressure on interest rates.

However, it will take time for the extra money to filter through to the mortgage market and for shell-shocked banks to relax the more stringent lending criteria they have adopted.

Ray Boulger, of John Charcol, the mortgage broker, reckons that, for the next few months, first-time buyers will struggle to find lenders prepared to advance as much as 95 per cent of a property’s value, while 100 per cent mortgages will remain out of the question for the foreseeable future.

The expected improvement in the mortgage lending market will not, on its own, halt the slide in UK property prices, which is forecast to continue.