Massive mortgages for key workers prompt fears of crippling debts

Bradford & Bingley's MarketPlace subsidiary launched the loan. As long as a key worker was earning at least £20,000, it would lend at five times their salary. A "stepped" fixed interest rate would be used, which would gradually rise over a five-year period to reflect pay rises and promotions.

Another building society, Portland, said it would link with MarketPlace to provide the same service.

The scheme has caused concerns that 40-year home loans could be passed on to the buyers' children and that future repayments could be difficult to meet. Traditional mortgages are around 3.25 times a person's income.

Bradford & Bingley group commercial director Ian Darby said the mortgage was aimed at "key service workers, such as firemen, who have been particularly hard hit by recent increases in house prices".

Observers are concerned about how borrowers will be protected when the five-year fixed-rate period comes to an end.

We are concerned this mortgage could be unsustainable and trap people into long-term debt

David Greening, LGA project officer

The Local Government Association project officer, David Greening, said: "There are more viable options available to key workers, and we are concerned this mortgage could trap people into long-term debt. It makes unsubstantiated assumptions about future increases in income and this could make the mortgage unsustainable."

One sector insider said: "There is no mention of any safeguards after the five-year period – or are key workers to be thrown to the lions like the rest of us?"

A spokesman for homelessness charity Shelter said any lender should clearly state how much extras such as payment protection would cost – "because that's the true cost of the mortgage". Mortgage lenders should also make clear risks such as increases in interest rates and the penalty for defaulting on payments, he added.