Chancellor Alistair Darling is to meet with mortgage lenders to discuss ways to help homeowners to survive the credit crunch.

The Bank of England unveiled a £50 billion scheme on Monday to tackle the credit crunch by allowing banks and building societies to swap their riskier mortgage-backed assets for safer government bonds in a bid to kick-start crippled money markets.

Mr Darling told MPs he will meet the Council of Mortgage Lenders to discuss the new scheme.

He added: "In the light of everything we are doing with them, I want to discuss with them how they can pass on the benefits of falling interest rates as well as wider Government support to mortgage holders."

Bank of England Governor Mervyn King said the arrangement was necessary to boost liquidity, restore confidence in the banking system and "protect the rest of the economy" from the credit freeze.

Mortgage lending has fallen to historic lows since the start of the crisis last summer, with falling houses prices threatening a wider impact on the UK economy.

The Bank of England has slashed interest by 0.75% in the past five months, but many lenders have upped the cost of borrowing this year to repair balance sheets holed by losses on mortgage-backed investments following problems in the US housing market.

Liberal Democrat Treasury spokesman Vince Cable called for banks who have suffered losses to raise their own capital through rights issues - following the example of the Royal Bank of Scotland, which is expected to ask shareholders for billions this week.

Mr Cable said: "If banks are going to receive support from the Government, it must be conditional. Banks and their shareholders must bear the brunt of previous bad lending, not taxpayers."

Taxpayers' Alliance analyst Matthew Sinclair described the swap mechanism as "dubious".

He said: "The Government has already exposed us to more than enough risk in Northern Rock, they should be extremely cautious about further exposing the taxpayer to the risks of a housing market in trouble."

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