Within hours of trading opening in London, sterling was down almost four cents against the greenback to $1.8036 – the biggest intraday decline in 15 years.
The news that the Government has taken ownership of the UK’s biggest buy-to-let lender also left banking shares reeling, with HBOS down 8pc, Barclays and Lloyds TSB 7pc lower, and Royal Bank of Scotland more than 10pc lower.
Housebuilders failed to escape, as investors targeted companies with exposure the UK consumer. Taylor Wimpey was off 11pc and Barratt Developments down 6pc. Overall, the FTSE 100 fell almost 3pc to below the 5,000 level by late morning trading and the FTSE 250 was off 3pc.
B&B’s mortgage book will now join Northern Rock under government ownership in a move analysts reckon will saddle each UK taxpayer with £2,750 exposure to the market.