25-year fixed home loans should be the norm, says Chancellor Alistair Darling

The Chancellor called for a longer-term approach to borrowing money for Britain's 11.8million homeowners with mortgages.

Fixed-rate mortgages are popular, but most currently run only for up to five years.

Mr Darling plans to encourage the launch of home loans fixed for up to 25 years, giving more security to hardpressed homebuyers.

He said he wanted to see "greater availability of affordable long-term fixed-rate."

"For many households, particularly those on low incomes, fixing the level of mortgage repayments for several years makes real sense," the Chancellor added.

"It can also contribute to wider macroeconomic stability."

He will reveal plans in his first Budget next month to encourage lenders to offer fixed-rate mortgages lasting up to 25 years at reasonable rates.

Mr Darling said he also wants to reduce the penalties that currently sting borrowers if they want to get out of their mortgage early.

Latest figures show that about 65 per cent of mortgages are taken out at fixed rates, but usually lasting for only two, three or five years.

Only a handful of deals currently exist for cautious homeowners who want to fix their mortgage costs for a long time.

Britain's biggest building society Nationwide is the only major UK lender to offer a 25-year fixed-rate deal.

It had to scrap its first offer after just five weeks because it proved too popular when it was launched last April.

Nationwide, the fourth biggest lender, subsequently relaunched the deal allowing homeowners to fix their mortgage at 5.98 per cent until 2033.

Other lenders offering 25-year fixed rate deals are Kent Reliance, Manchester Building Society, the Co-op, Cheshire Building Society and Norwich & Peterborough.

Such deals take the uncertainty out of home loans which can cripple borrowers if rates rise sharply.

The Financial Services Authority recently raised fears about 1.4million people whose cheap fixed-rate mortgage deals will expire this year.

Many will struggle to find a new affordable mortgage deal as lenders become stricter about who they hand money to.

In his speech to the Engineering Employers' Federation in London, Mr Darling insisted that the housing market is radically different to the slump of the early 1990s.

Despite three months' of falling house prices, he said low interest rates and low unemployment made the market more resilient.

He also attempted to distance Britain from the U.S., which is in its worst property recession for decades.

House prices in Britain are still underpinned by acute shortages in property supply, Mr Darling argued.

It is not the first time ministers have considered the subject of long-term mortgages.

In 2004, leading economist David Miles produced a report for Gordon Brown which concluded: "There are a number of potential legislative and regulatory barriers to the cost-effective funding of longer-term fixed-rate mortgages."