Mervyn King yesterday stepped up his campaign against taxpayer guarantees for mortgage funding, saying they would impede necessary restructuring in banks, prove expensive and were likely to be long-lasting.

The Bank of England governor announced that he would set out a new interim liquidity support facility for banks next week, so that they would still be able to “access liquidity insurance” after the initial Special Liquidity Scheme window closes on October 21. He would also consult on a permanent liquidity facility.

Anxious not to raise expectations about its likely impact, he insisted this permanent facility was there to 'smooth the adjustment of financial institutions hit by unexpected shocks' and ' provide a source of long-term funding to the financial system'.

It 'will not and cannot solve the shortage of funding to finance bank lending, including mortgage lending', he insisted.

Financial Times, Daily Telegraph, The Guardian