The rise of the 40 year mortgage

Graham_Devon

Fast-rising house prices are forcing home buyers to stretch their mortgage terms up to 40 years to get a foothold on the property ladder, raising fears of a return to the risky lending practices common before the financial crisis.

One in five borrowers are looking to spread their repayments over 30 years or more, compared with one in 12 a year ago, according to the Mortgage Advice Bureau. Most demand comes from first-time buyers, who are opting for longer-term repayments to cut costs, but face paying much larger interest over the longer term.

One person interviewed by the guardian who had took out one of these mortgages commented...

Allard says she is not daunted by the idea of paying a mortgage for 40 years. “My broker wasn’t sure how I was going to take it, but I just accepted it. Yes, the thought of paying it until I’m 66 is scary, but I try not to think about it,” she said. “The flat has already gone up £10,000 in value. It makes more sense to me to have extra money each month now, rather than in 20 years’ time. I’d rather have a life and be able to go travelling than be a slave to my mortgage payments. I live in the now.”

The BOE are apparently monitoring the situation... you can say one thing about the BOE - they are forever monitoring things!


http://www.theguardian.com/money/2015/oct/09/first-time-buyers-stretching-house-prices-mortgage-repayments-property-ladder

Blacklight

It's the next logical progression. Rapid expansion of small cities and backwater towns next on the agenda.

ukcarper

My first mortgage in 1972 was 35 years

System

ukcarper wrote: »

My first mortgage in 1972 was 35 years

And your life is ruined now, right?

zagubov

IN Japan they've had 100 year mortgages for quite some time. They get passed down through families.

Of course if your kids don't look after you when you're old you can sell your mortgage to the state in exchange for care.

Could go that way here.

Mistermeaner

Paraphrasing ..... "I'd rather have the extra money and go travelling. I live for the now"

It's so tough for youngsters like allard

HAMISH_MCTAVISH

Fast-rising house prices are forcing home buyers to stretch their mortgage terms up to 40 years to get a foothold on the property ladder

Drivel.

Mortgage affordability under MMR is assessed based on a 25 year term.

If they want to take 40 year mortgages they're idiots.

They could afford 25 years.

But may have to forgo an annual iphone upgrade and the second foreign holiday each year....

Conrad

Graham word >> just hand
everyone a sorted life and carry on with mass immigration so that any amount of house building is never enougn

zagubov

I visited West Germany near the end of the 80s. Same land area and population size that the UK has now.

It had endless forests and agricultural land, spacious cities with good public transport and homes with more floorspace than the UK and far better cultural and recreational facilities. A vast train network and a motorway network that went everywhere.

All this in a land that had a million acres of military land and factories that stretched for miles and had absorbed 20% of the population of the then East Germany as well as vast numbers of guest workers from Yugoslavia and Turkey.

If the UK thinks it's overcrowded, it needs to organise itself better.

chucknorris

ukcarper wrote: »

My first mortgage in 1972 was 35 years

So I imagine that you are now lumbered with decent equity and a low mortgage, if only you had thought this through. You and your family could be living in an Edinburgh bedsit right now, without the hassles of ownership, and the possibility of meeting new friends whilst queuing to use the toilet.

jamesd

HAMISH_MCTAVISH wrote: »

Drivel. ... Mortgage affordability under MMR is assessed based on a 25 year term.

That's an interesting assertion, for PS12-16 Mortgage Market Review Feedback on CP11/31 and final rules says this:

"Q7: Do you have any comments on our proposal to drop the
requirement that affordability should be assessed on a
maximum term of 25 years?

25. There was a strong consensus in favour of dropping the requirement that affordability
should be assessed on a maximum term of 25 years. Respondents felt this was too restrictive,
and in particular would prevent younger customers from getting on the property ladder.
Instead, they felt that a customer’s individual circumstances should be taken into account.

26. Respondents also noted that dropping this proposal would be consistent with increasing life
expectancies and working lives of customers.

Our response
We have dropped this requirement."

Given that the FSA rules document is explicit that under MMR they removed the 25 year requirement for affordability checks, why are you asserting that affordability must be checked over 25 years under the MMR rules?