GOVERNMENT plans to push homeowners into long-term, fixed-rate mortgages are flawed, despite fears that interest rates will rocket over the next 18 months, according to a senior financial executive.

Robert Hollinshead, chief executive of Newcastle Building Society, believes a period of interest rate stability lies ahead and that consumers will exercise their right to short-term choice.

"I think (interest rates) are now at the bottom but the thought they are going to go much beyond four per cent or 4.25 I find really strange," he told The Northern Echo.

"Equally, I do not believe property prices are collapsing. There is danger with the big London properties and some flats locally. But the traditional borrower in the traditional house I think is fine."

Rapid price rises had been bad news for first-time buyers, he said, but had given older homeowners a saving grace if their pensions had fallen short of expectations as they could downsize and use the equity to bolster their income.

Mr Hollinshead said: "Even in this part of the world it is becoming an issue getting onto the property ladder. Equally, most people have not got, or will not have, enough money to retire on. Property prices going up for the first-time buyer has been a problem but for the other end it has been a salvation."

The Newcastle Building Society has continued to go from strength to strength during this time. It yesterday reveal-ed profits were up 4.4 per cent on the back of record lending and new partnership deals.

Pre-tax profits in the half year to June 30 were £9.4m after gross mortgage lending during the period climbed to its highest-ever level at £331m.

Faced with growing competition in its savings and mortgage markets, the Newcastle has branched into providing mortgages and savings products through partnerships with companies and other financial services providers.