Mortgage shakeup to tackle UK homes crisis

Ministers plan to shakeup Britain's mortgage market to tackle the crisis in affordable housing that is posing a threat to the economy said the Chancellor Alistair Darling, last night

Mr. Darling said Labour would shortly issue proposals to increase the supply of long-term fixed-rate mortgages for terms up to 25 years, amid concern that some of the bigger lenders such as Barclays, Abbey, Northern Rock and Mortgage Express are only offering shorter-term mortgages so they can repeatedly charge high arrangement fees.

Mr. Darling said that housing had become a much more important political issue in the past five years said "It is a huge issue and it is not just being raised by people setting up homes themselves. Parents and grand-parents are saying, 'What's going to happen to my children? How are they going to get a house?'"
Mr. Darling said the government would also simplify the planning system and add to the supply of housing, thus ensuring everyone had a decent home. He said he was prepared to face down the environmental lobby on an issue that Gordon Brown has made a priority.

"Planning is a sensitive issue. I will yield to no one in my determination to protect our heritage, but if we don't increase the supply of houses the problem will get worse and worse and worse."

The chancellor said he was keen to minimise the environmental impact of house-building, but "the idea that we should stop building houses is one I don't accept. It's something we have got to deal with and I'm determined to take action."

Last year 160,000 houses were built in Britain, well short of the 223,000 the government estimates are needed each year.

Mr. Darling said: "There simply aren't enough houses. We are not keeping pace with the number of people setting up homes. In terms of mortgages, there has been a big expansion in fixed rate mortgages over the last two or three years, but they have all been short term, for a period of two or three years. When you look around the rest of Europe, it is more common to have longer-term fixed rates. We need to look at that. We need to reduce the volatility."

With UK property trebling since 1997, and interest rates having risen five times in less than a year, the average mortgage payment is at a record level relative to incomes, thus making a home out of the reach for many, especially first time buyers.