Datamonitor, the premium business information company reports HBOS is in discussions with the UK Treasury about offering long term fixed rate mortgages.

In April, Chancellor Gordon Brown announced that he favoured long-term fixed rate mortgages over the short-term fixed rate and variable rate products more common in the UK. HBOS is now in discussions with the Treasury about launching such a product. But, while it may make the Chancellor happy, there will be little to attract consumers, says Datamonitor.

The UK mortgage market is dominated by variable rate and short-term fixed rate mortgage products. But Chancellor Gordon Brown wants to change things. Following his announcement in April that housing finance needed to become more certain, it has now been revealed that HBOS is in talks with the Treasury about offering long-term fixed rate mortgages.

Long-term fixed rate mortgages are not entirely new to the UK market. Northern Rock and Cheshire Building Society continue to offer mortgages fixed over a 15-year and 25-year period respectively. Standard Life Bank has, on several occasions, offered a 25-year capped rate mortgage, while Halifax and Newcastle Building Society have offered mortgages fixed over both 25-year and 10-year periods.

However, when long-term fixed rate mortgages have been offered in the past, consumer interest has been poor. Only 300 of Halifax's 10-year fixed rate products were sold and in the first six months of Cheshire Building Society's product being available, only 125 were sold. Consumers, it seems, just do not like the idea of fixing their mortgage repayments for the life of the loan if it means losing the flexibility they can enjoy with other shorter-term products.

So why is there renewed interest in long-term fixed rate mortgages? Ultimately, it seems to come down to the likelihood that the UK will one day adopt the euro. When it does so it will be beneficial if the UK mortgage market is in line with those elsewhere in Europe. Since long-term fixed rate mortgages are common in the eurozone, they should in theory, be common in the UK too.

But should they be? Adoption of the euro aside, argues Datamonitor, the answer must surely be no. The UK mortgage market is too sophisticated and too diverse to require the introduction of these products, and there will be little to attract consumers to mortgages that historically are uncompetitive and by their very nature restrictive.

In contrast to the Datamonitor report, a survey published recently by accountancy firm KPMG, found that nearly 60% of mortgage holders would be likely to take out a long-term fixed rate mortgage, while only 30% said they would be unlikely.

And the respondents indicated the set-up fees of a long-term product were not a deterrent with 41% of respondents said they would be willing to pay a 2% set up fee in return for a competitive long-term fixed mortgage rate.