No frills mortgage

The Liberal Democrats are calling for lenders to offer a “five-year fixed, no fees, no frills” standard mortgage option where lenders compete to offer the cheapest rate.

Dubbed the SafeStart Mortgage, the product would initially be offered to borrowers at 85% LTV.

Based on a rate of 4.5%, the Lib Dems predict that if borrowers kept up repayments the LTV would fall to 75% over a five-year term.

The party argues that there is no place in the current market for mortgages of 100% LTV or more, given the threat of negative equity over the next few years.

Guarantees could be provided by the government, but the Lib Dems say the guarantees would more likely come from insurers.

Insurers would guarantee against the depth of house price falls, rather than the asset quality of each mortgage.