Responding to David Miles’ interim report on the potential for increasing the use of long-term fixed-rate mortgage finance in the UK, the Council of Mortgage Lenders (CML) says that it “does not believe that they are likely to become the predominant choice for consumers in the foreseeable future, irrespective of any plausible policy interventions.”

While welcoming Professor Miles' observation that the market is "innovative, flexible and intensely competitive for new business", the CML says it does not believe the market can be manipulated at the expense of consumer choice.

Consumer demand would have to change dramatically to achieve such a shift, says the CML, and this seems unlikely for the time being, because price is a major reason why consumers generally choose shorter-term deals. In an environment where general interest rates are anticipated to rise only modestly, this may be entirely rational - but increasing consumers' understanding of risk is still important.

Michael Coogan, CML Director General, commented: "The question of whether and how to incentivise the market for long-term fixed rates is far from straightforward to answer.”

“It depends on whether you believe that consumers are currently making rational choices or not, on how many you believe may be disadvantaged by the current structure of the market, and on whether you believe the benefits of shifting the market outweigh the potential costs.”

"The CML believes that market forces should primarily be allowed to operate. Aside from some relatively minor technical interventions, we do not favour policy manipulation in favour of a long-term fixed-rate market as we believe the potential benefits are uncertain and could result in higher costs for consumers in the end.”

"Any interventions should, we believe, pass the litmus test of helping to underpin the growth of sustainable home-ownership in the UK."