Chancellor planning 25-year fixed mortgages

The number of long-term fixed-rate mortgages lasting up to 25 years could grow under plans outlined by incoming chancellor Alistair Darling this week.

The minister argued that longer-term mortgages would help homeowners save money on arrangement fees, which they have to pay more frequently if lenders only offer shorter term deals.

The expansion in fixed-rate mortgages, which protect homeowners from the need to make higher home loan repayments every time the interest rate set by the Bank of England rises, has been concentrated in two- and three-year deals to date, he explained.

Tackling the problem would make Britain's fixed-term mortgage landscape more like that of European countries, he said, where longer-lasting fixed-term products are the norm.

Affordability concerns among first-time buyers, homeowners and parents of children looking for their first home, meanwhile, make it vital to increase supply in the property market, Mr Darling conceded.

"We are not keeping pace with the number of people setting up homes," he said.

Nevertheless, the chancellor stressed that planning was "a sensitive issue", with the need for more new homes counterbalanced by the imperative to "protect our heritage".

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