ÐÇ¿Õ´«Ã½

Long-term fixed-interest mortgages, an idea promoted in last week's Budget, could undercut existing low-cost homeownership schemes such as Homebuy and shared ownership, the sector has warned.

At last week's National Housing Federation affordable housing conference, Kathleen Dunmore, a consultant with researcher Three Dragons, said: "If the banks get their act together to produce good fixed-interest mortgages they could be less expensive than low-cost ownership schemes now on offer."

The introduction of long-term fixed-interest mortgages is to be considered as part of the "debate on housing" that chancellor Gordon Brown called for last week.

Many in the Treasury see such mortgages as a cost-effective way of making homes more affordable to key workers and people on intermediate salaries, it is understood.

Low-cost homeownership was not "punching its weight in the sector as whole", Dunmore said. "There is a lack of critical mass within housing associations. The people charged with looking at low-cost homeownership are further down the management hierarchy and unable to influence decision-making."

The new mortgage model would be a blow to the Housing Corporation, which earmarked a fifth of its 2003/04 approved development programme funding for low-cost homeownership – more than double the amount allocated last year.

But Neil Hadden, assistant chief executive of the corporation, said the government was paying "tremendous attention" to low-cost homeownership, a shift demonstrated by the creation of a taskforce to explore the issue.

He added that, despite suggestions in the Communities Plan, employers could not yet be expected to contribute to low-cost homeownership schemes: "So far there has been no capital help from employers – they are just not at the races."

The government looked to registered social landlords to "seize the opportunity" presented by the extra ADP funds, said Hadden. But there would also be a "tremendous premium" placed on delivery, he added.

Hadden's warning is consistent with plans to increase partnering between the Housing Corporation and RSLs. Under those proposals, larger, long-term allocations will be available to RSLs with the best records in development.