The Bank of England has agreed to bolster the UK mortgage market by swapping £50bn of Government bonds for banks’ mortgage-backed securities.

The Government is hopeful that the banks will use the bonds to restart lending between themselves which will improve liquidity in the market and make funds available to mortgage customers. The swap is expected to significantly undervalue the mortgage-backed securities in order to ensure the risk stays with the banks and are not passed onto taxpayers.

This follows the news that new investors hoping to get into the buy-to-let market and existing landlords looking to extend their portfolio will find it harder to get funding as more and more lenders have joined a growing list of institutions unwilling to offer products for this type of investment in the current climate.

Last year there were more than 3,600 buy-to-let mortgage products but this figure has now dramatically been reduced to around 600 as the credit crunch begins to bite.