Long-term fixed rates have been out of favour in the UK since the 1960s, but in the US and parts of the European Union they are an integral part of the mortgage market.

The catalysts for this change of heart in the UK are the prospect of lower interest rates in the years ahead and new techniques in financing.

In the forefront is the Woolwich, the UK's fifth largest mortgage lender.

Bobby Moore and England celebrate world cup victory in 1966, and that UK inflation was at 3.8%

It is in the process of arranging a joint venture with a Californian-based lender, the Countrywide Credit Industries. At the heart of its business is the arranging of 30-year fixed mortgages.

Woolwich media relations manager Hilary McVitty said: "They are streets ahead in terms of efficiencies, in the way they process mortgages at speed and make better use of technologies."

The Woolwich's joint venture with the US company involves streamlining its mortgage business by using "securitisation", a key component to potential changes in the lending to homebuyers in the UK.

Securitisation

What securitisation involves is selling assets as a bond to institutional investors.

In this case it would be a package of mortgages sold by a bank of building society.

The bank, or building society, would earn a fee for selling the bond and the institutional investor that buys this bond then gets the repayments from homeowners for the years the bond has to run.

For those who take out mortgages there will be little that changes on the surface. Their point of contact will stay as it is with the bank or building society.

At the Abbey National, 20% of their mortgages are already securitised.

For many in the home loan market it would mean expanding this technique.

Generally, most UK mortgage providers use their existing reserves, fuelled by money in savings accounts and funds borrowed from the money markets, to set up homebuying loans.

The future

The then UK Chancellor Denis Healey had to grapple with inflation at 15.9% in 1977

The Woolwich is clear where this new style of mortgage venture with its Californian partner could take it.

"Looking ahead, Woolwich believes that over the next few years increasing pressure to minimise costs, together with opportunities generated by the development of the European Monetary Union will give the joint venture company additional opportunities to provide mortgage services in Europe.

Woolwich group finance director Robert Jeens said: "We see the joint venture developing in three stages: serving our Woolwich customers, serving other lenders in the UK and then offering that service to borrowers in Europe."

It could lead to other mortgage providers 'outsourcing' their business to the Woolwich's new operation, which should be up and running by the end of the year.

Cheaper mortgages would be delivered through a combination of lower interest rates and cheaper administrative costs.

With the prospect of nailing inflation and the UK shedding its recent history of boom-and-bust economic cyles, calmer waters may mean an easier passage for those wanting to plan for the future.

Time will tell. The Abbey National's mortgage product director Margaret Schwarz believes that long-term fixed mortgages will come, but not for another five years or so.

"Based on the assumption that interest rates stay low for quite a while then consumers will want to fix for a longer period of time.

"The other option must be consumers not being forced to pay high redemption fees if they change their mortgage company."

In the US such redemption penalties do not exist. It could be exported here too and using more securitisation could be one of the means by which change is introduced.

Turn off

So how does the UK's largest mortgage lender approach this? A spokesman for the Halifax said it had no immediate plans to offer any long term fixed rate mortgages but would do so if their customers wanted them. For them that moment has still to arrive.

"We tested the market some time ago, in 1995, with a 25 year mortgage and there wasn't a great deal of interest.

"It was fixed at around 8.25% but no-one really picked up on it."