The government say they want to free up lending by pumping billions into the banks, and buying all their "toxic debt" (I hate euphemisms like this don't you? - it should say "careless losses")
Why not use the NR, which they now effectively own, or NS&I, as a vehicle to lend out new mortgage money at good rates to punters who want to borrow? This would be subject to all ye olde fashioned prudent lending criteria that applied years ago. (