The Government unveiled proposals yesterday to encourage lenders to offer “more affordable” long-term, fixed-rate mortgages in an effort to bring more stability to the housing market.

Gordon Brown said that the Government would legislate to introduce so-called covered bonds to assist mortgage firms to finance their lending over the longer term.

Covered bonds, a type of mortgage funding that is common in continental Europe, allow lenders to offer better rates because they can borrow more cheaply in wholesale markets.

However, lenders said that the plans would only reduce the cost of long-term fixes by as little as one hundredth of a percentage point and would not help first-time buyers who normally did not have big deposits.

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Andy Wiggans, mortgage director at Bradford & Bingley, said that most lenders had been aware of the legislation coming and had already priced it into long-term fixed-rate deals.