The Bank of England will next week announce plans to swap 50 billion pounds of government bonds for UK bank mortgages in an effort to break a lending squeeze gripping the home loan market, the BBC said on Friday.

The broadcaster said in a report on its Web site the bonds would have a maturity of one year but would be rolled over for up to three years, meeting banks' demands for longer term debt but ensuring the loans are not accounted for in the national debt.

It did not give a source.

The Treasury said the report was "speculation". No one at the Bank was immediately available to comment.

Pressure has been growing on the government and the Bank to do more to resolve a mortgage debt crisis threatening to slam the brakes on the economy and which is contributing to a slump in support for Prime Minister Gordon Brown.

Banks' fear that high-risk mortgage debt is lurking on balance sheets has driven the interest rates at which they lend to each other well above the Bank's 5 percent benchmark, in turn raising borrowing costs for households and companies.

The new plan is expected to allow banks to temporarily swap mortgage-backed securities for government bonds to help free up their balance sheets and allow them to lend more to consumers.

Banks have warned lending could halve this year and, with an election due by May 2010, Brown's Labour government wants to ensure borrowers are not priced out of the market.

It is also desperate to stop another bank getting caught in the crunch after Northern Rock was nationalised this year.

Britain's second-largest bank, Royal Bank of Scotland, is expected to announce a rights issue next week to shore up its battered balance sheet - a move analysts see as being timed to coincide with the Bank of England bond plan.

A debt swap scheme, similar to one the United States announced last month, could make banks more willing to lend to each other at lower rates and could ultimately mean the Bank may not have to cut interest rates as aggressively as markets have been betting on.

Lehman Brothers estimated there was a 35 billion pound overhang of mortgage loans that would have been securitised if the credit crisis had not hit last year.