Very Long Term Mortgage Proposals Explained

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Critics said the proposal does not address the issue at hand, which is the cost of properties relative to people’s incomes.

That’s what you need to know.

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What are very long term mortgages?

The idea of ​​very long-term mortgages could see people buying a home with little or no hope of paying off their mortgage over their lifetime, instead the property and unpaid debt would be passed on to their children .

The most popular mortgage term among first-time buyers is around 30-35 years, but a multi-generational approach could extend that by decades.

The proposal could see mortgages passed from parents to children (Photo by Christopher Furlong/Getty Images)

Mortgages with a term of 100 years have been issued in Japan, but experts are skeptical about the impact the proposal would have in the UK.

The idea was floated in government because it could allow people to buy a bigger house than they could otherwise afford.

The government is already trying to increase home ownership with a package of measures including extending the right to buy to housing association tenants and trying to increase access to mortgages to 95% for buyers who find it difficult to save for a larger deposit due to high rent levels.

What did Boris Johnson say about very long term mortgages?

When asked if he was considering intergenerational mortgages that could be passed between parents and children, Prime Minister Boris Johnson told reporters: “Yeah, definitely.”

Outlining his plans to attract more people onto the property ladder, the Prime Minister said: ‘I think there are a lot more opportunities to help people with 95 per cent mortgages, there is now a number of products available, which we have tried to encourage.

Prime Minister Boris Johnson said he was “definitely” considering the idea (Photo by Carl Court/Getty Images)

“But also, we want to find all kinds of creative ways to help people become owners.

“Last year, in fact, we had 400,000 first time buyers, that’s a big number, we’re starting to turn the tide, but it’s crucial for this government and for our overall economic story if these numbers continue to be strong.

“We need young people to have the confidence, to have the deposits, the mortgages to be able to access property.”

What did the critics say?

Commentators have warned that very long-term mortgages will not solve housing supply problems and could further drive up property prices.

Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, said: “I think Boris is coming from the wrong direction.

“It’s not the mortgage market that keeps people from becoming homeowners; it’s the cost of ownership relative to people’s incomes.

“The problem isn’t finding ways to help people get into more debt, we have to find ways to build more houses, in areas where people want and need to live.”

Boards of estate and letting agents pictured in a residential street in Hackney, east London (Photo by DANIEL LEAL/AFP via Getty Images)

Rob Gill, Managing Director of Altura Mortgage Finance, said, “We are going Japanese. A decade of ultra-low interest rates, followed by intergenerational mortgages that have characterized the Japanese mortgage market since the mid-1990s.

“Low interest rates drive house prices up, long mortgage terms then keep them as the only way for first-time buyers to climb the ladder.

“It looks like governments around the world will do anything to avoid the alternative of falling house prices.”

Additional reports per AP

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