Mortgage takeovers 'may boost UK'

Sep 8 2008

British mortgage experts have welcomed the historic US government takeover of mortgage giants Fannie Mae and Freddie Mac.

The Bush administration has announced it is taking control of the two institutions to avert the potential for major financial turmoil.

Their bankruptcy could have triggered an economic collapse.

British mortgage specialists said the move will inject some confidence into the falling UK housing market.

The companies' bonds are held by banks and other institutions around the world, so the bail-out will have an international knock-on effect.

It could mean a boost in confidence for UK lenders, leading to the greater availability of mortgages.

Investors are also hoping the takeover will have a positive impact on worldwide stock markets.

The companies combined own or guarantee about five trillion dollars in home loans, about half the nation's total.

But they have lost 14 billion dollars (£8bn) in the last year and are likely to pile up billions more in losses until the housing market begins to recover.

US president George Bush said: "Allowing the companies to fail or further deteriorate would damage our home mortgage market, and could weaken other credit markets that are unrelated directly to housing."