Speaking at a Debt and Personal Finance All Party Parliamentary Group meeting, the Council of Mortgage Lenders (CML) director general Michael Coogan echoed Mervyn King’s comments to the Treasury Select Committee, when he emphasised that the Bank of England’s special liquidity scheme is designed to improve liquidity in the banking system, not to support the housing market.

Coogan said: “If it is used widely, as I expect it to be, and extends to over £50bn in asset swaps by banks and building societies, we think that some of that money will be recycled responsibly into the mortgage market. However, it was not the Bank’s main intention or aim. This possible outcome of recycled funds is also uncertain in terms of scale and timing."

Coogan believes all mortgage borrowers will be affected by the credit crunch. He said: “All borrowers will be affected in some way over time. In the short term, and contrary to popular belief, customers coming out of fixed rates in 2007 and 2008 appear to be managing the adjustment well so far. For some borrowers coming off fixed rates, higher payments will be affordable because their salaries have continued to go up. For others, the option of extending their mortgage term, switching from a repayment to an interest-only loan, or a short-term payment holiday may be an option if they have good payment histories.”