April 17 (Bloomberg) -- The Bank of England said financial institutions bid for 50 billion pounds ($99 billion) in its weekly auction, three times the amount offered and the most since January, as the credit shortage worsened.

The Bank of England offered 13.7 billion pounds in today's sale, it said in a statement in London. The amount the banks sought as a proportion of the auction, or cover ratio, increased to 3.7, the most in a month.

The gap between the central bank's benchmark interest rate and the cost of borrowing pounds for three months rose this week to the highest since December as financial institutions struggled to raise money. Their shortage of cash is forcing Prime Minister Gordon Brown and policy makers to find new ways to end the logjam in credit markets and prevent a recession.

``It shows the scale of the problem,'' said Nick Parsons, head of market strategy at NABCapital in London. ``There is not enough money being shifted around the system. You can understand why there is political pressure being brought about to solve problems in the markets.''

The gap between borrowing pounds for three months and the Bank of England's benchmark rate, currently at 5 percent, rose to 93 basis points on April 14. That was the biggest spread since December. The three-month rate fell 2 basis points to 5.91 percent today.

Complaint

The comparable rate for dollars jumped the most since markets seized up in August, climbing 9 basis points to 2.82 percent. The British Bankers' Association yesterday threatened to ban members that deliberately understate their borrowing costs. Participants complained that banks may be submitting inaccurate information amid the global credit squeeze.

Brown said yesterday he's looking for ways to inject funds into the mortgage market and is studying measures already taken in the U.S. While the government and the central bank haven't announced when they will publish their plan, it is likely to come in the next two weeks.

``We need more liquidity and on longer terms,'' Sue Anderson, a spokeswoman at the Council of Mortgage Lenders, said in a Bloomberg Television interview. ``Wider collateral would be helpful, and longer maturities would be helpful. We'd like lending to go out 12 or 24 months.''

Liquidity Operations

``These operations may be attracting more attention from primary institutions because the liquidity measures haven't been finalized,'' said Peter Dixon, an economist at Commerzbank AG. ``Their attitude may be that they don't know what's coming so they'll take what they can when they need it.''

Speculation that the Bank of England will announce a plan to help financial institutions as soon as next week helped push the pound from a two-week low against the dollar today. The currency traded at $1.9840 as of 3:26 p.m. in London.

British house prices, which have tripled in the past decade, are falling as mortgage lenders such as HBOS Plc and Barclays Plc's Woolwich unit withdraw their best deals and raise rates. The Bank of England has reduced its benchmark rate three times since December.

``The housing market is an issue that we have got to focus on,'' Brown told National Public Radio in Washington today. ``To get the credit through to the housing market is something that is not easy to do. There is going to have to be greater examination of how we can make that possible.''

House values dropped 2.5 percent in March from a month earlier, HBOS, the country's largest home-loan provider, said last week. Taylor Wimpey Plc, Britain's biggest homebuilder, said today sales this year dropped ``significantly'' and full- year profit will be at the lower end of its estimates.

Unlocking Credit

``They have to unlock the credit markets to prevent a full-blown recession from coming out of the credit market crisis,'' Robin Marshall, director of fixed income at Smith & Williamson, Investment Management, which oversees about $20 billion in assets, said in an interview with Bloomberg Television. ``However you dress this up, the banks can't borrow all their money from the Bank of England.''

Financial reporting regulators are seeking to speed up new rules that may force banks to disclose off balance-sheet interests to tackle the fallout from the market turmoil. The International Accounting Standards Board and the U.S.-based Financial Accounting Standards Board will discuss next week how to accelerate a series of projects, the London-based IASB said in an e-mail today.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

Last Updated: April 17, 2008 10:31 EDT