Mortgage takeovers 'may boost UK'

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The Bush administration 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.

Meanwhile, double-digit gains for banking stocks sent the London market almost 4% higher after the bail-out.

The FTSE 100 Index followed Asian markets to strong gains, standing 191.5 ahead at 5432.1 in early trading - just after its worst week in more than six years.

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."