News that the Bank of England is to make it easier for banks to lend to each other by accepting mortgage-backed assets in return for Government bonds, leaves many questions unanswered.

Will taxpayers have to foot the bill if these mortgage-backed assets turn out to be as toxic as those sold on by American banks and will the move have the desired effect anyway?

With a famine of around £50-£70bn in the mortgage market, anything which seeks to ease the logjam whereby banks are wary of lending to each other has to be welcomed.

But whether it will bring down the stubbornly high LIBOR interbank lending rate, currently stuck at around 6 per cent, remains to be seen.

It is LIBOR, (dubbed ‘the hoodie’ of the mortgage market by John Charcol technical manager, Katie Tucker),  which must come down before lower mortgage rates can be passed onto hard pressed homeowners.

In the meantime, last week’s 0.25 per cent cut in base rate has exerted little downward pressure on mortgage rates.

Bank of Scotland has increased its rates by between 0.3 and 0.5 per cent, pushing its 90 per cent loan to value 2 year fixed rates up  from 6.29 per cent to 6.79 per cent. 

Halifax has increased its two year rates by a huge 0.5 percent, to avoid a glut of maturities in 2010.  Lenders continue to ration their funds by risk, with Abbey reducing its maximum loan to value to 75 per cent for loans between £500,001 and £1m.

Mortgage deals continue to be withdrawn at only a few hours notice leaving housebuyers and re-mortgagers high and dry.

Once we’ve seen the details of the Bank of England’s new lending programme, there may be more grounds for optimism. But in the meantime, I’m not holding my breath.