Announcing the Budget for 2008, Darling suggested that long-term fixed rate products, for 10, 20 or 25 years would help to instil confidence.
Previous statements by the Chancellor in 2007 calling for longer-term fixed rate deals had been criticised for being out of touch with the market.
Commenting on Darling’s re-affirmed commitment to set in place more long-term products, David Cameron, Conservative party leader, said: “The government lives in a completely different world to the rest of us.”
In his Budget speech, Darling said: “I want to see more flexible and affordable long-term fixed rate mortgages for 10, 20 or even 25 years. I will seek views on how we can deliver – drawing on international experience – the right framework for the UK to achieve affordable, long-term fixed rate mortgages.”
Commenting on the proposals, Brian Murphy, head of lending at Mortgage Advice Bureau, said: “The Chancellor believes that home owners should have more access to long-term fixed rate mortgages; however, his belief that these deals can reduce risks for first-time buyers is somewhat naive.
"These products fail to match 21st century lifestyles. High divorce levels and ease of travel mean people are unsure of where they will be in three to five years time, let alone 20 to 25. While a long-term fix might offer security, the unpredictable nature of our lives today should not be overlooked by borrowers when assessing the attractiveness of these mortgages.”
However, Adrian Coles, director-general of the Building Societies Association, welcomed the decision, although he conceded that borrower perception of long-term deals would have to improve if the initiative was to succeed.
He said: “The Chancellor’s interest in long-term fixed rate mortgages is to be welcomed. What is required now is to generate customer interest in them. They are a useful option but a significant change in the public’s perception of the benefits of long-term fixed rate mortgages will be necessary for these products to really take off. ”
