LONDON (Reuters) - The Bank of England's mortgage rescue plan has no upper limit on the amount banks can swap for government debt and would depend on what they needed to meet their operational needs, BoE Governor King said on Monday.

"There is no arbitrary limit on it -- it may well go higher," King told reporters at a briefing after the BoE announced its scheme.

The BoE said the plan was initially likely to involve about 50 billion pounds, but King said that was based on discussions with major banks and did not include all 119 institutions eligible.

King added the plan was designed to help the economy and not bail out banks. He said he did not want mortgage lending to return to its previous elevated levels.

"The purpose is to protect the rest of the economy from the banks," King said. "Banks themselves are going through a difficult and painful adjustment ... This cannot be avoided."

"If you need it, it is here. But there is a price to pay for it."

King said the success of the scheme would be judged upon financial markets stabilising over a prolonged period of time."

"The real test is we suddenly wake up and think that for the last twp months no one is concerned about fragility in the banking system," he said.