Mortgage lending 'must be restored' says Bank governor

Mortgage lending 'must be restored' says Bank governor

Governor of the Bank of England Mervyn King has said that the most important element of policy for the Bank and the government is to ensure that the levels of lending and borrowing increase.

Speaking to the Treasury select committee at Westminster following the pre-Budget statement, Mr King said the most "pressing" priority is "to ensure that normal bank lending is resumed".

Without this the economic situation could get a lot worse, he warned.

This may amount to a hint that should other measures fail, the monetary policy committee (MPC) could lower interest rates again to encourage consumer demand for mortgages.

The governor also said that the VAT cut announced yesterday will have a short-term downward impact on inflation.

Earlier this month official figures showed the consumer prices index inflation rate to be falling, down to 4.5 per cent last month from 5.2 per cent in September.

The MPC will decide on December 4th if another rate cut is needed.

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