Blow to long-term mortgages

MOVES to introduce US-style long-term, fixed-rate mortgages to Britain's housing market will suffer a major blow from a Government report next week.

It will reveal big obstacles in the way of large-scale moves away from the typical British mortgage with a variable interest rate towards the type of home loan more popular in Europe and America.

Imperial College Professor David Miles was commissioned to undertake a major study into the mortgage market by Chancellor Gordon Brown in this year's Budget.

His conclusions will please mortgage lenders, who claim homebuyers prefer the current flexible system. But they will dismay supporters of Britain's entry into the euro - including Prime Minister Tony Blair - as changes to Britain's housing market must be undertaken before a referendum on entry.

If Britain joins the euro, millions of property owners on variable loans would be highly vulnerable to interest-rate changes ordered from Brussels. Long-term fixed interest mortgages would offer much greater security.

In Britain, only 25% of home loans are fixed-rate - usually covering only a five-year period. That compares with nearly 100% in Germany, 90% in Denmark and more than 70% in the US.

Professor Miles's report is expected on Tuesday - the day before Brown delivers his Pre-Budget Report in the Commons.

This could also extend tax breaks to workplace nurseries and childcare schemes in a move to encourage more mothers back to the job market. Brown feels many mothers are reluctant to return to employment because of the lack of affordable childcare in the private sector.

The Chancellor is likely to spell out more details of his flagship 'baby bond' - a trust fund for each child born after September last year. Most children will get £250 while those from poorer families will get £500.

Other measures may include extra help for pensioners, possibly by extending the fuel allowance.

Brown is also expected to introduce moves aimed at revitalising the rental property market, boosting enterprise and clamping down on wealthy tax-avoiders.