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Review leader Miles rejects fixed views on long-term loan outlook

Professor David Miles, who is conducting a review into long-term fixed-rate mortgages for the Government, has dismissed comments there is no appetite for the product in the UK.

At the CML&#39s annual conference in London, Miles said the low demand for fixed rates stems from many factors, including consumers&#39 understanding of risk and the portability of fixed rates. He told delegates this should be seen as a starting point rather than as an answer to the question.

Miles is due to present his findings alongside the preBudget report next week.

CML director general Michael Coogan said he thought that Miles would be looking favourably at US-style adjustable-rate mortgages.

But Miles said it would be “wrong-headed” to take a look around the world and say the UK should be like other models.

He also quashed speculation that volatility would be removed if the UK had larger proportions of long-term fixed-rate mortgages, calling this a naive and bizarre belief as there are many other factors which affect the stability of the economy.

He said: “Given how volatile short rates might be, given where they might move in 10 years, given the information provided on products and structured pricing, given consumers&#39 understanding of the portability of fixed rates and of early redemption charges, all of this leads to a low demand for long-term fixed-rate mortgages. But this is a way of asking a question rather than answering it, this is our starting point.”

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