Responding to the joint press release from the Bank of England, HM Treasury and the Financial Services Authority (FSA), the Council of Mortgage Lenders (CML) emphasises that the issue currently facing lenders is one of liquidity and funding, not lending quality. The FSA has said that Northern Rock is “solvent, exceeds its regulatory capital requirement, and has a good quality loan book”.

Northern Rock’s savers and borrowers can therefore have confidence that the loan requirements with the Bank of England do not reflect any underlying business problems, but are a reflection of a general lack of confidence in the financial markets, which is making it more difficult for all lenders to raise funds from the markets.

Michael Coogan, CML director general, said: “Consumers need to understand that the problem for lenders generally at the moment is in raising funds, not in lending quality. 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.

“All lenders are facing funding pressure at the moment, and what they need is a return to more normal market conditions as quickly as possible. We welcome the Bank’s intervention and confirmation that it is keeping a close eye on the situation.”