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40 year mortgages now on offer
Turnbull2000
Posts: 7,588 Forum Member
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http://www.independent.co.uk/money/mortgages/fortyyear-mortgages-tempt-firsttime-buyers-on-to-the-property-ladder-despite-high-costs-9701798.html
Pretty much as I anticipated a few years ago, though I expect calls to soon be made to re-allow interest only i.e. unlimited term mortgages in the near future, to allow first-time buyers to complete with unregulated buy-to-let borrowers.
The number of first-time buyers prepared to pay double the cost of their home to get on the property ladder is soaring as more lenders begin to offer 35 and 40-year mortgages.
"Without a doubt, 30- or 35-year mortgages are becoming the new 20- and 25-year terms," he said.
"People will borrow for longer as house prices continue to rocket – which they will until the supply-side issues are seen to.
"The market certainly needs to reflect the fact that people are working for longer and living longer.
Pretty much as I anticipated a few years ago, though I expect calls to soon be made to re-allow interest only i.e. unlimited term mortgages in the near future, to allow first-time buyers to complete with unregulated buy-to-let borrowers.
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These longer mortgages are just what we need to keep and further inflate the price of housing in the UK while simultaneously maintaining housing as affordable to buy.
How people think this constant house price inflation helps matters is beyond me.
It's not a market failure, it's a result of government policy to prevent housebuilding and subsidize farming. If land owners were allowed to do what they liked with their land (within reason) and there were no subsidies then we see millions more houses being built than currently.
There has been pressure from the government since the right to buy was first introduced, but it's primary purpose isn't to subsidise or protect farming (just look at how many farms fold and how much so-called farmland lies idle) - it's to inflate the price of housing stock in an attempt to attract the political support of homeowners and landlords who "feel" weathier as a result. This control is enforced primarily through our planning system, which is one of the most restrictive and pernicious in the developed world and has shifted over the past four decades from being a tool for the support of housebuilding to a tool designed primarily to prevent new housing being built.
However, the answer isn't to simply return to an era where there was no planning system - history suggests that having no controls at all leads to overcrowding, poor quality construction and the proliferation of slums. In the long term we will need to build millions of new houses - there's simply no way around that. In the short term we need to think about measures we can take (even if they're just temporary) to pop the bubble of the over-inflated housing market - up to and including rationing of supply to a legal limit of one house per person.
H'mm. To only own their house when they're in their dotage?
Very attractive.
Can't see that is any worse than renting one in your dotage, and in any case you own it the minute you buy it and mortgage repayments are nearly always lower than rental costs.
Just because you get a 40 year mortgage it doesn't mean that you will take that long to pay it off but it may mean that the repayments in the early years become more affordable. With overpayments and profits from house moves, many mortgages are paid off well before their term length. I took out a 25 year mortgage 5 years ago but I plan to have it cleared in the next 10 years.
Yes, I agree with all of that. However I was replying to the claim that problems with the housing market are due to market failure when they are in fact due to government failure. The current situation as almost entirely down to a deliberate decision to prevent one type of land use and encourage another.
It's ironic, I have numerous issues with capitalism and support government intervention in many cases; however the single biggest problem we face in the UK is primarily down to deliberate government intervention in a free market (which goes well beyond planning control). The greatest hypocrisy of the Tory party and Right wing thinkers on here is that they can support such actions whilst criticize every other type of government intervention.
Yes, I appreciate that but I still don't see how this is an "attractive" thing for the young.
That's probably true but very little about the housing market is attractive to the young. In these days of more responsible lending I can't see us ever going back to those 100% (or even 125%) mortgages that we saw 10 years ago.
These 35 or 40 year mortgages won't be the solution to everyone as they will still need to raise the deposit but if it helps some then it has to be a good thing, surely?
Interest, in the latter years of a 40year mortgage, wouldn't be a huge amount, and would reduce each year. Most of the mortgage payment would be capital repayment, which the taxpayer wouldn't support.
That is an issue but do remember salary multiples rose and deposit levels fell many years ago so it is not a new problem and that caused many issue such as sub-prime mortgages. The salary multiples afaik are now lower so an extended mortgage repayment term is not unexpected.
The main problem of course remains that demand exceeds supply especially in property hot spots like London.
If we continue our current policies on house building then I think we will all but see the end of straight forward ownership for the majority of people within 25 years. I envisage a new system where property companies lease you a house for an indefinite period of time with provisions for retirement. You never actually own the house but will have some rights to pass on the leasing agreement after your death.
So could the future be renting your home but with more tenants' rights ?
Just have to hope that by extended mortgage repayments does not fuel house prices to keep increasing, as that will not help at all
That's very possible and it might be an attractive solution to some house hunters just like some people prefer to lease a car than own it. People would have more long term security in a leased home than they would in a private rental. If that encourages developers to build more homes so that they can lease them out (and make more money on them than just a one off sale) then it could work.
What we need is a variety of solutions rather than the traditional one size fits all 25 year repayment mortgage.
While the mortgage rescue schemes are of two types, one where the the person has their outstanding mortgage redued or completely paid off by a government loan secured on the property, which can be paid interest only, with the outstanding capital recovered at the borrowers death or at the properties sale. The other type is the state buying the property and the person then paying rent at less than market rent.
Yes, and leasing should be cheaper than renting as the company will get long term security of income without the expense of maintaining the house (which would be the leasee's responsibility). The biggest issue would be retirement and how to secure the property during that period; maybe people would have to take out a 'second pension' that commits to paying the lease fees until death.
I'm not saying it's an ideal solution but it will be the only way that normal people will be able to have a property is house prices continue to rise at recent levels.