“No frills mortgages” will help kickstart lending

The Liberal Democrats have called for the introduction of basic mortgages secured by the Government to protect borrowers from the collapse in lending by banks and building societies.

“Safestart” mortgages would be fixed for five years at a suggested interest rate of around 4.5 per cent and would be available to borrowers with a 15 per cent deposit. There would not be any fees attached to the deal.

The plan by the Lib Dems is designed to break the deadlock in the mortgage market, caused by the collapse in wholesale moneymarkets which traditionally supported new mortgage lending.

Mortgage lending fell to a record low in January. Lenders granted £12.4 billion in mortgages last month, down 8.4 per cent from £13.5 billion in December and down 52.1 per cent year on year, figures from the Council of Mortgage Lenders show.