Legal & General supporting the development of long-term fixed-rate mortgage funding across Europe.
Financial economist Andrew Clare says the implementation of such a system in the UK, being considered by Professor David Miles for the Treasury, makes sense but he is more concerned about Europe's mortgage market, which he says needs major attention.
He is calling on the European Central Bank to identify ways to make its interest rate changes more effective and more even across European regions.
Clare believes implementation of a long-term fixed-rate mortgage market across the EU would make European interest rate changes and monetary policy more effective.He says the recent downturn would have been more easily weathered if Europeans were able to refix their mortgages at no cost as interest rates fell, as they can in the US.
He says: “We believe that the ECB should be taking the lead in identifying ways of making its interest rate changes more effective and more even across European regions. When it comes to nfluencing European demand, the ECB is pushing on a piece of string.”
Mortgageforce managing director Robert Clifford says: “I think trying to somehow align interest rates here and in Europe has definite attractions, given that we have a very vibrant market and one which is distinctly different from the rest of Europe. However, in the UK there is massive consumer opposition to long-term rates, given the attractiveness of short term rates here.”