50 year mortgages - next gov scheme to prop up prices

[413x]

Guardian link

Seemed like this was inevitable. But I can't understand how it can work?

Usually you get 3 generations alive at once and for most 2 will be needing separate housing simultaneously.

Therefore how does a parent pass this mortgage down? Thier kids would ideally already be owning with mortgage by time the mortgage is passed?

I can't even wrap my head around how this would work vs typical inheritance? Unless there's some inheritance tax break etc?


If someone can explain how this is of ANY benefit. Let me know!


I suspect in theory you'd just die not completing your ownership. So effectively it's not multi generational. It just allows you to borrow more and never pay it off?

 

[CapitalOne]

I always thought this would go the other way, and a bank would give you some kind of Fallout SPECIAL test and give you a mortgage at 21 for 50 years and just own you and your career choices. If the government want to double down on this they will hit us with massive inheritance tax…doesn’t feel very Tory…but then nothing they do does at the moment.

Edit, to answer your question, it makes no sense in a free market economy.

 

[Semple]

Therefore how does a parent pass this mortgage down? Thier kids would ideally already be owning with mortgage by time the mortgage is passed?

I guess that's kind of the point - it's unlikely kids would be getting a mortgage unless they're in good jobs.

The benefit seems obvious - to help people onto the property ladder in whatever way possible.

Tbh I'm not surprised, I've been saying for months on these type of threads that I imagine we'll be seeing lifetime mortgages soon. It doesn't matter what the balance is when you die - the point is that the property would get sold, the bank takes however much is owed and the family get whatever remains.

 

[CapitalOne]

”Lifetime” mortgages have existed for a while, but they’ve been focused on those with not much “lifetime” left

A better description is “guaranteed repossession mortgage”

 

[413x]

I guess that's kind of the point - it's unlikely kids would be getting a mortgage unless they're in good jobs.

The benefit seems obvious - to help people onto the property ladder in whatever way possible.

Tbh I'm not surprised, I've been saying for months on these type of threads that I imagine we'll be seeing lifetime mortgages soon. It doesn't matter what the balance is when you die - the point is that the property would get sold, the bank takes however much is owed and the family get whatever remains.

Thought as much.
It's not really multi generational. More a beyond your work life mortgage.


This could really prop up house prices. All of a sudden you're allowed to plan to not pay off a mortgage from the start.
The question "at what age do you plan to retire?" vanishes.

 

[Semple]

Thought as much.
It's not really multi generational. More a beyond your work life mortgage.


This could really prop up house prices. All of a sudden you're allowed to plan to not pay off a mortgage from the start.
The question "at what age do you plan to retire?" vanishes.

It's not quite like that though is it. Matter of fact that if you don't pay off your mortgage in your lifetime then the bank will take what is owed. No different to a repossession.

If people can't afford to pay it off in their lifetimes - or don't have descendants that would inherit then why would they be bothered if the mortgage was never paid off.

 

[413x]

It's not quite like that though is it. Matter of fact that if you don't pay off your mortgage in your lifetime then the bank will take what is owed. No different to a repossession.

If people can't afford to pay it off in their lifetimes - or don't have descendants that would inherit then why would they be bothered if the mortgage was never paid off.

I'm guessing in reality a lot of thier kids would already have another 50 year mortgage started. So the product won't be passed on.

The kids will organise selling the house. The bank will be paid off (along with substantial exit fees) and the equity will be split via a will as what would happen today

 

[The_Arbiter]

We all knew/thought this was coming, or is coming, or might come. Question is, what happens after this has been exhausted? Going from 30yrs or even the occasional 40yr (i may have seen IIRC), to full on 50yr standard is mental.

Surely it can't happen currently if interest rates are headed fully upwards. But never say never i guess.

 

[CapitalOne]

We all knew/thought this was coming, or is coming, or might come. Question is, what happens after this has been exhausted? Going from 30yrs or even the occasional 40yr (i may have seen IIRC), to full on 50yr standard is mental.

Surely it can't happen currently if interest rates are headed fully upwards. But never say never i guess.

It is indeed mental, or to be specific “rent”

 

[413x]

It is indeed mental, or to be specific “rent”

It's a half way house (lol) between rent and own.

But it only kicks the can down the road.

 

[Mysterae_]

I can imagine people with 50 year interest only mortgages if they become a thing. There will be no inheritance, perfect for those with no kids or with nobody to pass anything on to. Insanity but affordable.

Think of a massive house with a massive mortgage to match - suddenly it becomes affordable and the tenant (sorry, "homeowner") has more disposable cash to spend on the economy. Sounds quite tory.

Or worse still, it becomes the new rent control method. It might kill off buy-to-rent as it'll be significantly cheaper to "buy" as long as landlards (sic) are banned from capitalising on it.

It's the banks that will make bank as it's a golden investment - the "owner" pays for the maintenance, upkeep, decorating etc and the bank gets all the equity once you're dead.

 

[BUDFORCE]

Man we are so ******.

Where the hell did all the wealth in this country go?

I feel sorry for our kids, they are going to have it harder. I remember being little and being told, "you don't know how easy you have it" well I'm that person now, and that's certainly not what I'm saying.

 

[BUDFORCE]

Just to add, I work for a mortgage lender, not a big one in the scheme of things mind you, but we were all told yesterday to basically expect to be quiet for a while. But it's basically becoming not profitable to lend at the moment, mortgage interest rates are skyrocketing.

How long, don't know, but with interest rates and inflation kicking in, the **** is hitting the fan, and it's starting right now.

It won't be 2008, there is a lot better regulation and resilience built in following that, but there external factors this time, energy costs, raw materials, exchange rate, higher import costs are at play.

 

[Mysterae_]

@BUDFORCE , if interest rates are increasing, why as a lender is it becoming unprofitable? Is it because the lender borrows the money from another party at similar interest rate?

If the lending industry can see the storm ahead it's definitely time take heed.

 

[Semple]

Man we are so ******.

Where the hell did all the wealth in this country go?

I feel sorry for our kids, they are going to have it harder. I remember being little and being told, "you don't know how easy you have it" well I'm that person now, and that's certainly not what I'm saying.

It's interesting you say that. There is still wealth in this country. A young couple both in professional jobs are likely to have an income of 70-90k by the time they're in their 30s. With a 10% deposit that should buy them a house in the 300-400k range.

It becomes impossible for a couple both on minimum wage (~42k household income). It becomes problematic for a couple both on an average wage (~62k household income). So it's the lower end of the market that gets priced out of home ownership and subjected to a life of rent. But there's plenty of young graduates in professional jobs who should still be able to afford to get on the ladder.

 

[BUDFORCE]

@BUDFORCE , if interest rates are increasing, why as a lender is it becoming unprofitable? Is it because the lender borrows the money from another party at similar interest rate?

If the lending industry can see the storm ahead it's definitely time take heed.

Yes exactly that, swap rates are they are known as.

Even deposit taking banks because they also borrow, plus they will need to increase the rate on savings so it'll all catch up as well.

 

[413x]

It's interesting you say that. There is still wealth in this country. A young couple both in professional jobs are likely to have an income of 70-90k by the time they're in their 30s. With a 10% deposit that should buy them a house in the 300-400k range.

It becomes impossible for a couple both on minimum wage (~42k household income). It becomes problematic for a couple both on an average wage (~62k household income). So it's the lower end of the market that gets priced out of home ownership and subjected to a life of rent. But there's plenty of young graduates in professional jobs who should still be able to afford to get on the ladder.

I'd agree with this.

We've only just started earning above average. (70k between us, and we both WFH now)
It was a slog saving for the house in 2020 with 52k.
And most of the saving was done on even less.

We've both upped our salaries AFTER getting the house. It was a grind before. Unfortunately for anyone not quite there, that bar jumped massively last 2 years. To get an equivalent house to what we got you'd probably need 65k vs our 52. Absolutely brutal and basically **** for anyone chasing.


Being in that average pay band is tough. You know you should be able to afford a house so you save and save.

We also had the advantage of no debts or kids.
But its getting harder all the time. I feel for anyone chasing it near average wage.

On 70k, yes. Definitely achievable. If you really live cheap, in an average area you can probably save 2000+ per month on 70k

 

[chaparral]

On 70k, yes. Definitely achievable. If you really live cheap, in an average area you can probably save 2000+ per month on 70k

The biggest problem with trying to save is that so much income is normally already spent on paying the very high cost of rent these days

 

[Zefan]

It seems mental, but the alternative is higher chances of a price crash which could (would?) take the economy out, which is worse even for prospective FTBers.

 

[413x]

The biggest problem with trying to save is that so much income is normally already spent on paying the very high cost of rent these days

In our last stint we got the cheapest place we could find. It was 450ish a month for a 1 bed upper floor of a split house. It was absolutely horrible. Did a year in that. I think that would be 550+ now. But it was a dive.

Never have gone from something so **** to something really nice. Had to keep telling ourselves.. Only a few more months