Whatsmore,£40bn(thevalueofathirdoflastyearsmortgagelending)ofmortgage-backedsecuritieswillmatureandrequirerefinancingoverthenextthreeyears,notedCapitalEconomics。

Sobanksneedtofindadditionalcashtoreplacepartoftheircurrentfunding–aswellassecurefreshfundstocompensateforwhattheywouldhaveraisedviasecuritisation。

Whatnext?

OnesuggestedsolutionistoextendtheBankofEnglandsSpecialLiquidityScheme,wherebybankscanswapmortgagesissuedbefore2007forgilts,tonewloans,althoughtheBankisloathtodothisandtheharshtermswouldnotattractmanybanksasaprofitablewaytofundmortgages,saidSeanOGradyinTheIndependent。

AndaGovernmentguaranteeonnewsecuritieswouldjustleavetaxpayersworseoffifhomeownersdefaulted,saidTheGuardian。

Itsuptothemarkettofindanewmodelofmortgagefinance,saidtheFT。

Ultimately,Governmentactionwouldsimplydelaythepainofthenecessaryadjustmentintheovervaluedhousingmarket。

Inanycase,whilesupplyofmortgagesistight,demandissettofallfurthernowthatconsumersarebecomingconvincedthatpriceshavefurthertofall,asLexsaidintheFT。

Tumblinghousepricesbodeillforconsumption,whichisalreadyintrouble。

ThelatestCBIsurveyofhigh-streetsales,coveringthefirsthalfofJuly,wastheweakestin25years。

Meanwhile,industryiscontractingandoverallgrowthslidtojust0。

2%inthesecondquarter,saidCapitalEconomics。

Andallthisisbeforethefullimpactofthecreditsqueezeandthehousingmarketdownturnhasbeenfelt。

Getsetforoutrightrecession。

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