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50 Year Mortgages

Published: 07 July 2022
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Author: Carl Shave - CEO and co-founder
Last updated: 26May2024

New reports suggest that the government are proposing 50 year mortgages. This is one of the many ideas they are considering to tackle the first time buyer market.

A generation of homeowners will still recall the maximum term offered for a mortgage being 25 years and to many this is still the regarded as the typical term however, times have changed and it is now a common sight for first time buyers to arrange 35 or even 40 year mortgage terms.

Property value growth and in turn increased loan sizes now result in longer terms being taken to suit affordability either from the borrower’s point of view or the lender’s.  These terms however are typically still arranged to tie in with borrower’s retirement ages so how will increasing this to 50 years work.

The government are working on the basis that these loans will be passed between future generations allowing equity to be built up over time rather than give the need to rent.  Under the plan the government have indicated that this could enable people to borrow more although it is not made clear how their proposals would work.  Whilst the idea of multi generation loans may sound alien to us it is certainly not new.  Japan have been offering 100 year mortgages for many years.

Whilst there are possible positives to take from this report, there are some fairly serious concerns about debt being passed down through the generations and how affordability will be decided for those that look to take on the debt in the future.  It has also been highlighted that whilst this may give a solution for some to purchase their first home, it still does nothing to address what most regard as the bigger picture being that of actual housing.

Records indicate that the typical full time employee could expect to spend about 9.1x their income to purchase a property compared to 7.9x in 2020.  By finding further solutions to enable people to purchase could only help exasperate the rising value of property and provide nothing more than short term solutions but with a much longer lasting negative impact to the problem to be solved.

With the cost of living crisis and the recent base rate interest rate rises, longer term fixed rates are also on the rise.  The popularity of 5 year fixes is at an all time high and some lenders are now starting to offer much longer fixed rates spanning 40 years.  The take up of these longer term fixed rates however still remains low as many still offer limited flexibility that many still seek as their lives and needs change.

Here at Just Mortgage Brokers we welcome any proposals that could assist those who ordinarily would not be able to purchase their first home, knowing that without change many of our clients who now own their own home would not have been able to do so. We also however appreciate that simply by finding solutions for people to purchase is not the golden ticket that will solve the wider housing issues.

Contact our team today to discuss your mortgage requirements.