No lobby says euro will hit homebuyers

The battle over the euro intensified last night when the No Campaign claimed that British mortgage-holders would not pay lower interest rates inside the eurozone - contrary to Tony Blair's frequent claims.

Far from converging with the eurozone's interest rates, Britain's borrowing costs were slightly lower and its housing market remained stubbornly different, not least in home-owners' preference for variable over fixed rates.

In a detailed rebuttal of the Yes campaign's assertions, the group accused rivals of being rooted in the 70s and 80s, when Britain's tendency to high inflation led to high interest rates - cured by Gordon Brown's stable monetary regime since 1997.

"There is a perception in financial markets that the British monetary policy framework has a confirmed track record and that inflation is under control," the group said, with the result that the historically higher interest rate charged in Britain might soon be a thing of the past.

In any case, the No pamphlet, UK Mortgages and the Euro, claims the British mortgage market is so efficient that home buyers are charged one point above base rate - 5.2% - while across the Channel the charge is often two to 2.5 points above base rate. That means higher interest rates in 10 of the 15 EU member states.

The pamphlet, written by Graham Leach, the chief economist at the Institute of Directors, also warns that inside the euro UK property taxes might have to be raised to EU levels. VAT on new homes is zero in Britain but as high as 18% on the continent; stamp duty is also higher.

Simon Buckby, campaign director of Britain in Europe, the main "yes" lobby, said: "British interest rates have been consistently higher than in Germany in the postwar years.

"Earlier this month the National Institute persuasively argued that interest rates would be lower and more stable inside the eurozone than outside."