Adam Creighton

A fixed rate fix

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Darling banged on about how the government would encourage or facilitate the growth of a long-term, fixed-rate mortgage market for home buyers, especially first time buyers. Reviews and committees are apparently to be set up to examine this product in more depth.

London is, probably, the world centre of new financial product development and it seems odd that such products would not have been developed and marketed already if they were economically feasible. The likely reason they have not is that fixed rate mortgages are more expensive than variable rate mortgages: someone has to bear the risk of underlying interest rates moving around, either the bank or the borrower. A bank is not going to bear this risk for free, unless the government forces it to, which, given Labour’s proclivity for involvement with private banks is perhaps on the cards