Chancellor plans mortgage shake-up

Alistair Darling, the Chancellor of the Exchequer, has announced plans to help curb Britain’s affordable housing crisis. This includes changes to the mortgage market in the UK.

The chancellor said future proposals will increase the supply of long-term fixed rate mortgages, for periods of up to 25 years. Currently, there is concern that some lenders only offer short-term mortgages so they can repeatedly charge high arrangement fees.

Housing is now a much higher political priority according to Alistair Darling. He 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?’"

As well as more long-term fixed rate mortgages, the chancellor said the government would simplify the planning system, which would ensure everyone had a decent home.

"Planning is a sensitive issue" he said "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."

While the chancellor wants to minimise the environmental damage caused by house building, he said: "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."

As well as building more homes, Alistair Darling said Britain should look to Europe for ideas to reform the mortgage market: "There simply aren’t enough homes. 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 past two or three years, but they have all been short term. 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."

While some changes have been made as a result of a Treasury review in Britain’s mortgage market, Mr Darling said there are obvious incentives for mortgage brokers to advise customers to take short-term loans: "Brokers want you to come back every two years, rather than every 10 or 20. The Financial Services Authority has identified this as a problem."

Last year 160,000 new homes were built in Britain, significant short of the 223,000 the government estimates are needed to meet demand.

Mr Darling said the lack of affordable housing could affect economic stability. He said: "It’s been a problem for the south-east of England. It is now a problem for the whole country."

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