The Council of Mortgage Lenders (CML) has welcomed the Bank of England’s decision to inject an initial £10bn of three-month maturity funds to banks against collateral including mortgages.

This should bring down the three-month LIBOR rate, against which some borrowers’ mortgage rates are linked, and which affects the price of other wholesale funding including mortgage backed securities.

LIBOR stands for London Inter Bank Offer Rate, which is the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London.

CML believes this intervention will help to restore liquidity and confidence in the iterbank lending market, and shows that the Bank of England is serious about ensuring that banks have the liquidity they need.

Michael Coogan of CML said: “This support should enable three-month funding costs to decrease and get back to more normal levels. This is good news for lenders and for their customers, particularly those with mortgages linked to LIBOR for whom hefty increases in payments were looming.”