The Bank of England’s 50 billion pound credit swap for banks hit by the global credit crunch leaves a “sour taste ” for the Daily Mail, which accepts it is a necessary evil.

“How could allowing banks to swap their risky mortgage and credit card debts (amassed during years of lunatically-excessive lending) for cast-iron Government bonds be anything else?,” it asks. “So much for moral hazard.”

But for the Financial Times the Special Liquidity Scheme, which will swap banks’ risky mortgage assets for easily tradeable government debt, is “cleverly designed and welcome move to ease liquidity troubles.”

It says the scheme will protect the tax payer and does not absolve the banks of the consequences of their past lending mistakes.

The Times is also impressed by the “sensible and imaginative response” to the credit crunch but said Britain’s financial authorities took too long to accept the financial markets crisis was hitting the wider economy.

The deal is the “least-bad option available to economic policymakers“, in the view of the Independent, which calls for an inquiry to determine how the regulatory system broke down.

The Daily Telegraph says the scale of the operation is “startling” and says it is now up to the banks to make sure it works.

Both the government and the Bank of England are to blame for leaving taxpayers and borrowers more vulnerable to the global financial crisis.

“Monetary policy has been too lax, borrowing was allowed to spiral, despite a long period of economic growth, and the banks used the era of cheap credit to pursue reckless lending strategies,” the Telegraph said.

The Bank of England has responded to the credit crunch by cutting interest rates by one quarter of a point to five percent, the third cut in five months.

It acknowledges the risks of stoking inflation but says the availability of credit seems to be worsening.

With the difficulties of finding loans so painfully apparent and the housing market in dire straits, do you think it is being too cautious? Should it have cut more?

It’s been an eventful week for the housing market — the latest in a turnaround in fortunes brought about by the slowdown in house price growth and the liquidity crisis sparked by the U.S. subprime woes. This side of the Atlantic, the fallout from the credit crunch has continued apace, and lenders’ PR machines have been working on overdrive.

A week ago, First Direct withdrew mortgages for new customers after its relatively cheap deals saw borrowers flock to its doors. Then, on Monday, Britain’s biggest mortgage lender Halifax raised its rates, hiked its minimum deposit to 5 from 3 percent and introduced cheaper rates for those with 25 percent or more of their property value to put down. On Tuesday the first-time buyer became an endangered species: Abbey, Britain’s second largest home loan provider, stopped offering 100 percent mortgages, joining all its major rivals in requiring at least some deposit from borrowers — and pricing many trying to get a foothold on the ladder out of the market. The same day the Halifax house price index for March showed the largest fall since the recession of the early 1990s.

It comes as little surprise, then, to see the Nationwide reporting on Wednesday a four-year low in consumer morale during March. That tallies with an ongoing “flight to safety” that has seen people pull in the purse-strings and seek out safe havens. In the wake of the Northern Rock debacle, government-backed National Savings & Investments (NS&I) products have soared in popularity. NS&I offers savers a 100 percent guarantee, whereas the Financial Services Compensation Scheme protects cash on deposit with Financial Services Authority-regulated institutions only up to 35,000 pounds each.

NS&I, which pumps all the money it makes into the government (ironically, now the owner of Northern Rock), doubled its net financing target for 2007/08 to 5.6 billion pounds from an initial forecast of 2.8 billion pounds. The final figure will come in near to those 5.6 billion pounds, chief executive Jane Platt told me at a press dinner on Tuesday evening.

The increase is attributable to a number of factors: the market conditions and Northern Rock; Bank of England base rate rises totalling 1 percent between August 2006 and July 2007, and higher-than-expected inflation. Together, these have resulted in a boom in demand for NS&I’s products, in particular its direct ISA, the rate on which is tied to the base rate, and savings accounts which guarantee to beat inflation by a certain margin.

“It’s chicken soup time,” says Platt. “People have been living off caviar, but now it’s time for chicken soup.”

But Wednesday has also brought some positive news: the government appointed former HBOS chief executive Sir James Crosby to head a working group on ways to improve the functioning of the country’s mortgage markets, and HSBC said it would exploit rivals’ weakness in the mortgage market with an offer to match homeowners’ existing deals — a move that should do at least something to boost confidence.

It is, of course, vital for consumers that sources of funding for Britain’s mortgage market are refreshed. And the HSBC move has fired a shot across the bows of other lenders, ramping up competition in a market that some lenders are using to boost margins.

“I think what we’re going to see is some very profitable lenders over the next 12 months,” says Alex Murray, group director of mortgages at independent broker Thinc Group. “Some lenders are using the credit crunch as a way to streamline their proposition: many are going down the route of profit before volume.”

The broker is unable to help around a quarter of potential customers — either they want to borrow too much against the value of their property or their credit history is not clean enough. But, hopefully, this new working group will bring some much-needed confidence back to the market, aided by an anticipated cut in interest rates on Thursday: the crisis in liquidity has rapidly turned into a crisis of confidence.

In reality, though, that will not happen overnight, and the next few months will prove critical as to whether current woes prove a glitch or spell a chicken soup diet for far, far longer.

First Direct has pulled the shutters down on new mortgage business. Albeit a temporary move, it is yet more unsettling news for scores of homeowners coming to the end of cheap deals. Such a move is unprecedented, but perhaps comes as little surprise, given that the lender has been market-leading for quite some time. With pricing more or less 0.5 percent below that of its nearest competitor, the influx of new business that has created a huge backlog is understandable.

The mortgage market is moving at an alarming pace: First Direct’s decision to suspend new borrowing and push business to its parent company, HSBC, is yet another example of lenders taking action to manage volumes. Others have used other means of stemming inflows — increasing rates, withdrawing products and restricting their best rates to lower loan-to-value customers, as the fallout from the credit crunch continues.

Borrowers, particularly those nearing the end of offer periods, are unnerved. Three-quarters of homeowners face significant jumps in mortgage repayments when their fixed-rate deals expire, personal finance Web site Fool.co.uk says, with a typical increase in interest from 4.8 percent to 6.3 percent. Homeowners on discounted, tracker and capped-rate mortgages could face significant hikes too. On a typical 25-year repayment mortgage of 200,000 pounds fixed at 4.8 percent, monthly repayments are 1,146 pounds. But every one percent rise in rates increases these repayments by around 120 pounds. The low-rate party, it seems, is finally over, and borrowers — both new and old — could be forgiven for feeling the rug is being pulled from under their feet.

All, however, is not lost: there are still some attractive rates around, largely from building societies and smaller players. Cumberland Building Society has a 5.28 percent rate fixed until March 1 2010; Derbyshire Building Society charges 5.29 percent until July 31 2010; and Cheshire Building Society has a three-year fix at 5.49 percent. Indeed, building societies have proved the most competitive so far this year, according to online mortgage company mform.co.uk. It ranks best-buy products based on the true cost of a mortgage, including fees. Each time a lender appeared in the top 10 in the three months to March 31 they were awarded a point and, at the end of the period, the most points signify those lenders consistently offering good value.

Yorkshire Building Society was the most competitive mortgage lender during the first three months of 2008, with 24 points, followed by Furness Building Society in second place with 18 points, and the Chorley and West Bromwich building societies in joint third with 13. The big players — Halifax and Nationwide — scored just six and four points respectively, while Cheltenham and Gloucester achieved just two.

But with lenders pulling tranches of deals and changing their offerings on a near-daily basis, nothing remains the same for long. The message is clear: people looking for a new mortgage should shop around early to wade through the quagmire that is today’s mortgage market.

Money matters are climbing the list of the talks parents feel they must have with their children: the subjects of debt and saving for the future are now deemed to be more important than educating our offspring on sexually transmitted diseases (STDs), racism or religion, research by Engage Mutual Assurance shows.

Debt is the most common financial topic of parental education (64 percent) followed by saving for the future (62 percent). That ranks them fifth and sixth in the top 10 topics for parental “chats”, ahead of racism (58 percent), illness and death (53 percent) and STDs (52 percent). The only “facts of life” considered more important than these money matters in children’s at-home education are drugs and alcohol (78 percent), personal hygiene (74 percent), talking to strangers (73 percent) and the “birds and the bees” (71 percent).

The findings, from a poll of 2,000 people, are encouraging as financial education — for adults as well as children — climbs the political agenda. But they are a worrying reflection of the current environment. Britons’ debt mountain has tripled in the past decade and families are under increasing strain to make ends meet. A string of hikes in the cost of living — petrol, heating, food and transport — has compounded the problem.

Three-quarters of the population voice worry about the impact of the credit crunch on their purse-strings, according to research from BrightHouse Stores. Almost 60 percent are reining in spending on non-essentials, 43 percent are worried they won’t be able to put anything away into savings, others are spending less money on food and socialising, and 9 percent have even cancelled a holiday.

 Against that backdrop — and as recession looms – any advice on managing money should stand the generation of future adults in good stead. Perhaps, then, they will eschew that appetite for cheap credit exhibited by their parents before them.