First-time buyers opt for longer term mortgages

Turnbull2000

http://www.theguardian.com/business/2013/sep/13/first-time-home-buyers-mortgage-bubble

Buyers abandon traditional 25-year loans for repayment terms of up to 40 years to afford rising house prices

I do recall the FSA and regulators backing down on proposals to limit LTVs and salary multiples due to fierce lobbying from the banks, the potential threat to house prices and the ability to get more people on the 'ladder' - but wasn't aware that mortgage terms were also lobbied against. Apparently so.

After the financial crisis in the UK, the Financial Services Authority proposed strict affordability tests that would make lenders assess home buyers on their ability to repay over 25 years, but dropped the idea last October after lobbying by the banks.

This weekend Santander, which heavily scaled back its mortgage lending in the wake of the credit crunch, makes a relaunch into the mortgage market with loans that allow borrowers to repay over 35 years

Of course, longer mortgage terms allow buyer to pay higher prices, which turn causes prices to rise, which in turn requires longer mortgage terms...

If lenders start peddling 30-35 yr mortgages over the next couple of years, my forecast of 15-20% HPI up to the election may have been pessimistic.

Graham_Devon

Brilliant news. When that';s not enough, we can simply start lifetime mortgages, enabling you to sign your kids up to pay off your debt before they can even babble a word.

As for 35 year mortgages, fine, until you want to move and realise you've paid down hardly any of the oustanding capital.

You may find it good news, but I highly doubt you'd take such a "great news" product yourself. Just hopefully others will...

MrRee_2

Talking to youngsters I know who are clambering desperately to buy, they are all taking out 35 year and 40 years mortgages ...... I was staggered, but it's currently the norm so they say.

Then I thought for a minute ..... they will be working until they are 80 years old so it doessn't really matter.

RUN_RABBIT_RUN

wouldn't say that this is a new thing particularly, i was offered a 30 and a 35 year mortgage back in 2006 and i know several people who are either on a 30 year deal or were offered it at remortgaging within the last few years.

their choice really - as with everything in life, you have a choice

ukcarper

My first mortgage in 1972 was 35 year

FloppyDisk

It doesn't have to mean irresponsibility is behind it either, I took out my first mortgage last year - 30 year term so that I had the flexibility of lower payments but I have been making over-payments to suit. It should be gone comfortably within 10 years so the term is irrelevant to me.

Turnbull2000

ukcarper wrote: »

My first mortgage in 1972 was 35 year

Salaries weren't static back then mind.

I did expect mortgage terms to eventually rise in order to 'assist' buyer and sustain prices rises, but not until we neared affordability limits under long-term negative base rates and government backed mortgage lending.

With all these value boosters coming at once, the upcoming annual price growth could be quite significant.

CLAPTON

all depends upon the context

there are many young people are in careers where one can reasonably expect to gain promotion and an increase in salary (doctors, nurses, lawyers, engineers, teachers, nurses, accountants, IT people, general managers, etc etc),:

for such people an interest only mortgage or long period loan is completely reasonable and rational

Graham_Devon

CLAPTON wrote: »

all depends upon the context

there are many young people are in careers where one can reasonably expect to gain promotion and an increase in salary (doctors, nurses, lawyers, engineers, teachers, nurses, accountants, IT people, general managers, etc etc),:

for such people an interest only mortgage or long period loan is completely reasonable and rational

Nurses, IT people and general managers are all seeing pay decline. Not increase.

chucky

Graham_Devon wrote: »

Brilliant news. When that';s not enough, we can simply start lifetime mortgages, enabling you to sign your kids up to pay off your debt before they can even babble a word.

As for 35 year mortgages, fine, until you want to move and realise you've paid down hardly any of the oustanding capital.

You may find it good news, but I highly doubt you'd take such a "great news" product yourself. Just hopefully others will...

Life choices, no one forces you to take out a 35 year mortgage so you can afford a house. Buy a cheaper house on a 25 year mortgage.

I want an 18 bedroom house on Bishops Avenue. I'm going to start blaming everyone else like you do for the reason I can't afford one.

sulphate

We recently took out a FTB 25yr mortgage and I thought that was long.. honestly though, we do plan on moving again within 10 years so we'll probably extend it then.

I guess that's the problem, if you already have a 35yr mortgage you may not be able to extend it... particularly if that would push you over retirement age.