We need mortgage innovation - not white-labels of previous ideas

Commenting on the LibDem call for a five-year no-frills mortgage, Louise Cuming, head of mortgages at moneysupermarket.com, said: "While it's heartening to hear of proposals aimed at getting the mortgage market moving - sadly, this isn't even close to a solution.

"Any fix will have to be innovative - in keeping with these unprecedented times - rather than a white-label of previous initiatives.

"At the start of the millennium, CAT standard mortgages were the panacea structured by the Government to meet standards on Charges, Access and Terms. The idea was to introduce a straightforward, transparent product. Yet here we are, nearly 10 years on, and again we have a proposal of a no-frills product designed to meet designated standards.

"With the same ideas come the same problems. The idea is unlikely to meet lender or consumer needs. It depends on lenders competing to offer the cheapest rate, which is the driving force of the mortgage market now anyway.

"But lenders will only compete for borrowers they want and that is definitely people with a bigger deposit than 15 per cent. The big challenge is for mortgages requiring smaller deposits to be made available. It is insulting of lenders to insinuate that because an applicant only has a five per cent deposit that they will not be able to repay a mortgage.

"The final part of the LibDem idea is that insurers would guarantee against the depth of house price falls, rather than the asset quality of each mortgage. This, though, flies in the face of risk assessment.

"Risk should be based on the ability of the customer to repay a mortgage. The value of a house is only important if the borrower stops paying. An insurer will therefore want to understand the quality of the application before agreeing to take on any risk."