Chancellor Alistair Darling will reveal full details of the plan in the House of Commons this afternoon.
In a BBC interview yesterday he says:
“The bank will be making money available to the British banking system … the idea behind it is it will open up the market and it will begin the process of opening up the mortgage market.”
“The bank be lending them (UK banks) money – so it’s got to be repaid – and they’ll be taking security in return for it.”
The US Federal Reserve last month took similar action with a $200bn (£100bn) programme to boost liquidity in financial markets.
It is believed that the British scheme is intended to run for just over a year and will involve valuing the less liquid mortgage securities the BoE takes on to its books at a discount.