Could a 50-year mortgage that passes through the generations help more first-time buyers onto the property ladder?
The idea of “ultra-long” mortgages has been around in Japan for decades and is now the latest plan being considered as a possible way to get young people on the housing ladder in the UK.
Read on to find out how the scheme could work, and for our reaction to the proposals when asked for comment by the press.
50-year mortgages could help more first-time buyers onto the property ladder
In recent years the number of young people who own their own home has fallen – indeed the Times reports that the proportion of those aged 25 to 34 who own their own home has dropped by a fifth in the last 10 years.
As one possible way of helping first-time buyers onto the property ladder, the government is considering encouraging 50-year mortgages as one of the “creative ways” of boosting home ownership.
After a Conservative revolt blocked the easing of planning laws to encourage more building (and supply) of homes, flexible mortgage products are increasingly being seen as the most practical route to helping younger homebuyers.
Under the plans, people who would otherwise struggle to take out a mortgage could consider a loan with a 50-year term. Their children would then be able to inherit the debt along with the property.
The government hope that the scheme will allow people renting in the long term to use lifelong payments to build up assets instead. It could also enable homebuyers to take out loans that do not have to be repaid once they reach a certain age.
Speaking about the scheme, Boris Johnson said: “I do think there’s a lot more scope to help people with 95% mortgages. There are quite a few products available now, which we’ve tried to encourage. But also we want to find all sorts of creative ways to help people into ownership.
“Last year, actually, we had 400,000 first-time buyers, that’s a great number, we’re starting to turn the tide, but it is crucial for this government and for our overall economic story [that] those numbers continue to be strong. We need young people to have the confidence, to have the deposits, the mortgage packages, to be able to get into ownership.”
Critics say the plans don’t tackle the lack of supply and could cost more
While the details of the proposals are few and far between, a 50-year mortgage would likely mean that the loan was never repaid before a borrower died, meaning a family member would inherit the debt.
Ultra-long mortgages were introduced in Japan in the 1990s when banks launched a 100-year home loan that could be inherited by relatives. The aim was that the property, along with the mortgage debt, could be inherited and become an ancestral asset.
Commenting on the UK plans, our own Rob Gill told the Independent: “We are turning Japanese. A decade of ultra-low interest rates, followed by intergenerational mortgages, which have been a feature of the Japanese mortgage market since the mid-90s.
“Low interest rates boost property prices, long mortgage terms then keep them going as the only way first-time buyers can get on the ladder. It seems governments the world over will do anything to avoid the alternative of property prices actually falling.”
Critics also say the scheme does nothing to tackle the lack of supply of affordable homes in the UK and could end up costing borrowers significantly more.
According to the Times, a £200,000 mortgage with an interest rate of 3.5% would cost £1,001 a month if the term was 25 years. The total cost would be £300,374.
Meanwhile, while the same loan would cost just £706 over 50 years, the total payable would be £423,600.
Altura are a respected go-to industry commentator for the press
As a respected industry commentator, the press often approach Altura for comment on stories relating to the property and mortgage market in the UK.
As an example, after the announcement of the “50-year mortgage” idea, we were quoted by sources including ITV, the Guardian, LBC, the Independent, the Times and the Express and Star.
Journalists frequently ask us for our opinion and viewpoint on industry-related matters, so you’re always likely to see Altura feature!
Head to the press page on our website to read more comment and analysis on the biggest property and mortgage stories, including:
- Idea for extra-long term mortgages passed on to children considered – ITV
- UK house prices hit average of £294,845 in largest growth spurt since 2004 – City AM
- Shortage of property and desperate buyers behind “down valuations” – Mortgage Solutions
Get in touch
If you’re looking to get onto the property ladder, expert advice can help. Find out what Altura can do for you – email info@alturafin.com or call us on +44 (0) 20 3411 0079.
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