The Bank of England’s £50 billion lifeline to money markets should be “very positive” for the mortgage market and it should allow lenders to pass on benefits to customers, the Council of Mortgage Lenders (CML) said.

Speaking after a meeting in Downing Street with the Chancellor, Alistair Darling, CML director general, Michael Coogan, said although the £50 billion mortgage swap plan should be “only the starting point”, the funds should start flowing through the mortgage market “shortly”.

He said libor interbank lending rates should start to fall in the coming few weeks, feeding through into lower prices for mortgages.This effect would then be amplified as the Bank of England funds flow into the market.

Mr Coogan said the Chancellor did not put any great emphasis on calling for mortgage lenders to lower their rates. Instead, the discussion focused on the potential problems of “payment shock”, where households come off fixed-rate deals to face sharply higher monthly repayments, he said.

Potential solutions discussed included extending the term of mortgages and shifting borrowers from repayment to interest-only products.

But Mr Coogan noted that in any case, the worst of it may have passed, as many households on fixed rates have now been warned of the danger that their repayments could jump.

Furthermore, high levels of employment should ensure most are able to keep up with their repayments, he added.

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