Darling unveils 'gold standard' mortgage rescue bid

Thursday, 07 February 2008 12:00

New long-term mortgages are to be backed by a new "gold standard" lending scheme due to be unveiled at next month's Budget.

Chancellor of the exchequer, Alistair Darling, said covered bonds and mortgage-backed securities - the pot from which banks often borrow their funding - would be the focus of the scheme.

The ultimate aim is to increase transparency and boost investor confidence following the Northern Rock crisis and recent jitters in the property market.

Speaking at the EEF Manufacturers' dinner yesterday, the chancellor said the government wanted to increase the supply of housing over the long term and increase the numbers of long-running fixed-rate mortgages.

He said: "We want to see a greater availability of affordable long-term fixed-rate mortgages.

"For many households, particularly those on low incomes, fixing the level of mortgage repayments for several years makes real sense - it can also contribute to wider macroeconomic stability," he said.

Mr Darling attempted to ease fears of a property market slump and said housing market conditions today were not as bad as those experienced in the early 1990s. He said interest rates and mortgage rates were comparatively lower.

And he said more responsible lending meant the UK's housing market compared favourably to that in the US.

Mr Darling said: "There are important differences between the housing market in the US and the housing here.

"While many US mortgages were sold at hugely discounted rates, leaving people unable to meet repayments, when rates increased lenders in the UK have been more responsible in taking account of an individual's ability to pay.

"And demand for housing outstrips supply."

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