Personal Finance: USA-Style Mortgages Are Not Wanted Here; Gordon Brown Wants Britain to Look to the US and Adopt Long-Term Fixed Rate Home Loans. Jane Hall Asks If This Is the Way Forward

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Byline: Jane Hall

AT one time stability was the key to keeping your head above water where money was concerned.

You kept faith with the same mortgage, the same bank, the same employer and the same shops.

Now change is the key. People are encouraged to move their mortgage every few years, to shop around for better credit card, savings and insurance deals, and to transfer bank accounts and loans. Few stay in the same job for any length of time, and even the weekly grocery shop has fallen foul of consumer's lack of commitment with the big supermarket chains now all vying for our custom with the best offers in town.

Loyalty is a thing of the past - and it certainly no longer pays. But Gordon Brown wants to bring back a semblance of the ``good old days.'' Hence his pronouncement in an otherwise forgettable Budget, that he is considering establishing a market for long-term fixed-rate mortgages to stabilise the property arena.

Gordon Brown has said, ``Most stop-go problems that Britain has suffered in the last 50 years have been led or influenced by the more highly cyclical and often more volatile nature of our housing market. Housing finance needs to become more certain and plan-ning more flexible.'' It is his wish that Britain should move more into line with the US, where homeowners tend to take fixed loans over 30 years, rather than the 25-year term common this side of the Atlantic. In theory, it sounds a great idea.

There are currently thousands of mortgage products available all offering a plethora of interest rates, tie-in periods and add-ons. Choosing the right product can be like a game of pinning the tail on the donkey. You close your eyes and hope for the best.

But even the suggestion that Britain might move down the long-term fixed rate route has met with almost universal condemnation from financial experts - because the public doesn't want it.

Halifax, Britain's biggest lender, also says there is little demand for long-term fixes, with its most recent 10-year fixed-rate deal finding only 300 takers. A spokesman says, ``We are happy to participate in any review of the mortgage market. There may well be demand at some time in the future for a long-term mortgage, but there isn't at the moment.''

One reason may be that long-term fixes typically cost more - around 5.5% to 6% a year versus 3.5% to 4% for a two-year fix - and borrowers face hefty penalties if they want to walk away early.

In the US the fixed rate is typically around 6pc, making monthly costs higher.

Britain is almost alone in its attachment to short-term mortgage products such as two-year fixes or discounts. Around a third of outstanding mortgages are now either fixed or capped - mostly for the short-term.

Yorkshire Building Society is among many lenders to have looked at offering a 25-year deal, but decided against it because the rate would have been too high to appeal to customers. …