This document is the Final Report making recommendations on how the mortgage market in the UK can be helped to work better. It builds on the Interim Report that was published at the time of the Pre-Budget Report in December 2003. Reactions to that Interim Report and continuing consultation have had a significant impact on the recommendations made in this Final Report. The UK is a very innovative market, with a long record of creating new types of mortgages. It is plausible to think that deals like the ones discussed here would become more attractive if borrowers’ awareness and understanding of risk and return improve. There are several advantages of a mortgage combining fixed and variable rates. Borrowers can decide the level of nominal payment risk they are willing to take on, and choose the proportion of their mortgage on a variable rate accordingly. The variable-rate part of their mortgage can provide an element of flexibility; borrowers could have the option to overpay or – possibly underpay at no charge. A single mortgage allowing borrowers to mix variable and longer-term fixed rates for different proportions of their mortgage debt is a potentially useful product. Such mortgages have recently been offered in the UK.