£50bn lending boost explained

Normally the banking system depends on a market 'liquid' with cash. Mortgages and loans are funded by the repayments on them, plus loans between banks and funds from the money markets.

Fears over bad debt repayments means banks can get little money from other banks or the money markets, drying up funds for mortgages and loans and triggering a 'credit crunch'.

The Bank of England has stepped in, offering a deal where banks can swap potentially risky existing mortgage debts for secure government bonds. The initial uptake is expected to total £50bn.

The hope is that liquidity will be restored, encouraging banks to lend to each other and to offer mortgages and loans to consumers and businesses. However, repayment fears will remain.

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