A government commissioned report has warned that a lack of awareness is resulting in many home owners paying too much for their mortgages.

Professor David Miles has published his interim report analysing why long-term fixed-rate mortgages currently account for only a small proportion of the UK market.

While many borrowers could benefit from longer-term fixed-rate mortgages few choose these products at the moment.

Ministers are also keen to promote fixed-rate deals as a way of easing Britain's possible transition to euro membership.

The study finds that borrowers tend to attach much greater weight to the level of initial monthly repayments than "the overall cost of borrowing over the life of the loan".

It goes on to warn that many borrowers have "a poor understanding of risk".

As a result they pay little attention to the insurance which longer-term fixed-rate mortgages can provide against unexpected interest rate rises.

Professor Miles also finds that mortgage providers cross-subsidise from existing borrowers paying standard variable rates to new borrowers taking out discounted mortgages.

As a result homeowners start their mortgages with a good deal, but go on to pay over the odds in the later stages of the term.

"In recent decades there has been little long-term fixed-rate mortgage lending in the UK. This report analyses why that is so," said Professor Miles.

"For many households, particularly those borrowing a great deal and those whose incomes are uncertain, there are significant advantages of fixing the level of repayments for several years.

"Yet few of such borrowers take out longer-term fixed-rate mortgages."

The study said ministers must ensure the financial services industry does more to ensure borrowers make better decisions over the long term.

"Borrowers need to be helped to understand risk better and to make more forward-looking decisions and lenders enabled to fund loans and handle risk in the most cost effective way," said Professor Miles.

"I look forward to consulting further with all interested parties before putting forward recommendations next year."

Miles's final recommendations will be handed to ministers next year.