After our recent comments on the pros and cons of fixed rate mortgages, the Government added it's own opinion today when the Chancellor in his Pre-budget speech announced that he would be consulting with the mortgage industry on an initiave to provide a wider choice of long term fixed rate deals.

The problems of fixed rate deals in periods of rising interest rates came home to roost for many borrowers, when the low interest mortgage deals they had enjoyed for the past 2 or 3 years came to an end and they were faced with some very significant increases in monthly repayments as they selected a new mortgage deal. Some people say that we shouldn't feel sorry for them, as they had enjoyed much lower rates than the rest of us during that time and are only now coming back into mortgages at the going market rate. But when people enjoy the benefit of lower outgoings because of a great fixed rate mortgage they don't tend to save the cash for the time when their repayments go back up - no they use the money for other things and adjust their lifestyle to suit. As these lifestyle adjustments last for periods of years rather than months, they become embedded and people find it very difficult to adjust back when their outgoung expenses take an upward jump.

By encouraging mortgages wit hlonger periods of fixed rates the Government is hoping to smooth out this roller coaster ride of varying mortgage repayments and help borrowers get used to a more stable financial existence. It should lead to lower hous repossessions and encourage lenders to price deals more realistically rather than enticing people in with loss-leading low rate deals only to switch them onto higher rates as soon as the opportunity allows.

That's all good news for the mortgage companies, particularly as they need to give off the impression of more responsible lending during the current critical period of sub-prime lending that has caused so many problems across the world.

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