The Chancellor, Alistair Darling, says he is concerned that mortgage brokers have a built-in incentive to sell short-term fixed-rate loans, and this is a major cause of Britain's housing crisis.
Darling thinks long-term loans are avoided because brokers will not make as much money from customers with long-term deals.
The chancellor says: "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."
The Government is due to issue proposals to increase the supply of long-term fixed-rate mortgages to tackle the affordable housing crisis, according to the chancellor.
He says that lenders are providing short-term fixed-rate deals in order to repeatedly charge high arrangement fees.
Darling says: 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.”
In addition to increasing fixed-rate terms, the Government also plans to simplify the planning system and add to housing supply in order to make homes more affordable.
The chancellor says that he is not just concerned about those who are struggling to find affordable housing, but also thinks that the issue is posing a risk to economic stability.
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