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Crunch negotiations are due to take place this week between the Bank of England and a group of building societies in an attempt to prop up their levels of mortgage lending. The societies — including the Chelsea and the Skipton — were hit last week by credit ratings downgrades, affecting their participation in the Bank’s £185 billion Special Liquidity Scheme. The downgrades, by Moody’s, are based on a belief that house prices could fall by as much as 40 per cent and mean that some of the assets that the societies put up as collateral to the Bank in return for access to liquid funds may no longer be acceptable. Nine building societies were affected by the downgrades, although it is not clear whether all nine took help from the Bank. The nine are Nationwide, Chelsea, West Bromwich, Principality, Newcastle, Skipton, Yorkshire, Norwich & Peterborough and Coventry. A spokesman for Chelsea Building Society, which was hit worst by Moody’s last week, said that it “will be talking to the Bank of England to see what the downgrade means”. Although the society said it “was not an issue” for its customers, the outcome was likely to restrict its ability to lend. The negotiations are not understood to mean that there are any risks to the financial stability of any of the nine, but it does threaten to put a dent in the Government’s plans to get the housing market moving again by boosting mortgage lending. The Special Liquidity Scheme was intended to keep societies writing new mortgages at competitive prices, by ensuring that the lenders had access to liquid capital to support their loans. Building societies and banks were given £185 billion of Treasury bills to underwrite new mortgages. If the Bank deems that collateral put up by any of the participating banks or building societies is no longer good enough, it can demand that the financial institution put up new collateral. If they cannot, they would have to hand back the Treasury bills, and as a result mortgage fees could rise. A spokeswoman for Skipton Building Society said that it was working with Moody’s to ensure that it kept the highest credit rating on the relevant bonds and that it was confident that it would be able to. “As a matter of good practice, we will keep the Bank of England informed of any intentions we have regarding any potential restructuring,” the spokeswoman said. The Yorkshire Building Society was more confident that it could find other sources of collateral for the Bank if needed. A spokesman said that although Moody’s changes were important, the Yorkshire did not expect them to have a major impact on the society. There was criticism of Moody’s by some lenders. One, which asked not to be named, described the notion that house prices could fall 40 per cent as “overly pessimistic, dismal”. News of the talks comes as research indicates that the average asking price of a UK property has risen by almost £4,000 in the past month, up 1.8 per cent to £222,077, as sellers became more confident that buyers were returning to the market, according to figures published today by Rightmove, the property website. However, commentators said that raising asking prices could be premature, with renewed interest from sellers and buyers not expected to translate into recovery this year. House price indices based on transactions continue to show that prices are falling.