The use of long-term, fixed-rate mortgages will not have increased enough by the next Budget to allow chancellor Gordon Brown to recommend euro entry, finance directors have warned.
Brown's "not yet" speech on Monday gave the volatile housing market as a principal reason for staying out of the single currency for the moment (HT 23 May, page 14).

Brown hopes fixed-rate mortgages can stabilise the housing market. In his last Budget, he commissioned a report from Professor David Miles of Imperial College into ways to boost the take-up of such mortgages.

However, housing association finance directors said fixed-rate mortgages could take up to 15 years to become popular and would be difficult to use in shared ownership.

Anthony Parkes, finance director for Network Housing Group, said: "It would take 10-15 years for fixed-rate mortgages to make an appreciable effect. If people who are on variable rate stay where they were, it would just be new mortgages and remortgages taking up fixed rate."

He added that lower interest rates in the euro zone could be balanced out by higher margins on borrowing.

George McMorran, finance director at Southern Housing Group, said: "If you are a shared owner wanting to raise from, say, 50% to 75%, a fixed-rate mortgage might make it quite difficult."

The Chancellor also said there would be extra planning powers to boost housing supply.

These will be included in the Planning Bill, which is being amended and has been delayed until the next parliamentary session. A spokesman for the ODPM said they could include examining the powers of UDCs.

Source

Housing Today