[Finance] 40 year mortgages

Eric the meek · Sep 15, 2024

To continue, the demographic paths Japan and UK have taken have been very different. UK population was set to fall in the 1970s, but it didn't happen. Birth rates, helped by migration, began to climb, and demand for housing began to climb.

By 1999, the UK passed a milestone. It was the first year that the nation could no longer accommodate all its citizens. Since then, house prices have been a function of demand outstripping supply, and prices rising rapidly in thin volumes.

Today, societal trends that affect demand, supply and price, include a steady decrease in household size, a slowdown in the rate of household formation (due partly to necessity), and rate of housebuilding.

Be aware of local demand and supply as well. A 3-bed Victorian terrace in Fiveways, Brighton: £800,000. Same house in Newhaven: £350,000.

Triggaaar · Sep 15, 2024

Papak said:
Yes, but you also declare the full rent received as income first - thank Mr Osborne for that! Meaning I pay 40% income tax and get mortgage interest relief at 20% or whatever it is these days.

So? You're better off making payments off your primary residence, allowing your rental mortgage to stay higher, and getting more tax relief.

Papak said:
Hmmm, more like borrow as you are not making any capital repayments

That applies to anyone using a mortgage to help buy a property. It's still your property, because if it goes up in value (or down) then it's your profit (or loss), not the banks.

Papak said:
This is possible but not without risk

Of course, but that applies to all investments, including the house you bought. I'm not suggesting that repayment mortgages aren't better most of the time, but the claim was that interest only mortgages are a mugs game, and that's quite simply wrong.

dazzer6666 · Sep 15, 2024

Herr Tubthumper said:
There’s an article in today‘s Observer about this topic and it being seen as a “way out” of youngsters not being able to afford their first house. When the link is released I’ll post it.

This type of mortgage originated in the Netherlands a few years ago but is quickly spreading. After much consideration, I took out one of these a few years ago, with a Dutch bank, and will most likely be dead by the time the original term expires. All things considered, a lifetime flexible and totally portable mortgage seems sensible to me. There seems to be concerns with this product though.

What’s the thinking on here ? I spent ages mulling this over so I’m curious what others think.

Japan have been doing 50 year mortgages for a few years and they did at one point talk about a 100 year product that would passed down as part of an estate. Our government were also talking about 50 year mortgages in 2022…..

FatSuperman · Sep 15, 2024

I think they are a reasonable solution to the problem of insane house prices. But the actual thing we should be tackling is those prices. We cannot seriously be accepting that from now on, children have it harder than their parents did? It wasn't that long ago that you could have a totally normal job, still enjoy your life and also own a house. That's massively out of reach for most youngsters now, unless they are all happy to move to the cheaper areas (which of course will push the price up)

happypig · Sep 15, 2024

The biggest problem for a lot of younger people is pulling the deposit together; I know several people in the 30-40 age group that are paying more in rent than a mortgage would be.
The government needs to be pushing the banks to provide mortgages with much lower deposit requirements.

AmexRuislip · Sep 15, 2024

Herr Tubthumper said:
There’s an article in today‘s Observer about this topic and it being seen as a “way out” of youngsters not being able to afford their first house. When the link is released I’ll post it.

This type of mortgage originated in the Netherlands a few years ago but is quickly spreading. After much consideration, I took out one of these a few years ago, with a Dutch bank, and will most likely be dead by the time the original term expires. All things considered, a lifetime flexible and totally portable mortgage seems sensible to me. There seems to be concerns with this product though.

What’s the thinking on here ? I spent ages mulling this over so I’m curious what others think.

I'm sure the Germans have a similar thing, in regards to mortgages, where it's up to 35 years

When I lived in Germany in the late 90s, I'm sure there were mortgages that were passed onto family members

Herr Tubthumper · Sep 15, 2024

dazzer6666 said:
Japan have been doing 50 year mortgages for a few years and they did at one point talk about a 100 year product that would passed down as part of an estate. Our government were also talking about 50 year mortgages in 2022…..

The product I have can be transferred to others.

Thinking about this a bit more, I guess it is good business for the bank as they can retain customers long term if they keep the products within the mortgage reasonably competitive.

beorhthelm · Sep 15, 2024

happypig said:
The biggest problem for a lot of younger people is pulling the deposit together; I know several people in the 30-40 age group that are paying more in rent than a mortgage would be.
The government needs to be pushing the banks to provide mortgages with much lower deposit requirements.

this was tried in 00's, it didn't go all that well.

dazzer6666 · Sep 15, 2024

happypig said:
The biggest problem for a lot of younger people is pulling the deposit together; I know several people in the 30-40 age group that are paying more in rent than a mortgage would be.
The government needs to be pushing the banks to provide mortgages with much lower deposit requirements.

It’s the opposite - banks will get hammered by the regulators if they let LTV ratios get too high.

Papak · Sep 15, 2024

Triggaaar said:
So? You're better off making payments off your primary residence, allowing your rental mortgage to stay higher, and getting more tax relief.

You are best off being mortgaged as much as possible on the investment property but of course, loan to value affects interest rate so it is a balance.

I admire your bravery, going for an interest only mortgage to buy a bigger / better property, I also heard of someone doing the same 20 or so years ago. As far as I know, they did or planned to downsize at the last minute and buy outright with the equity they had built up during the years. As mentioned earlier in this thread, capital growth has slowed dramatically in recent years making the gains lower.

Triggaaar · Sep 15, 2024

Papak said:
I admire your bravery, going for an interest only mortgage to buy a bigger / better property, I also heard of someone doing the same 20 or so years ago. As far as I know, they did or planned to downsize at the last minute and buy outright with the equity they had built up during the years. As mentioned earlier in this thread, capital growth has slowed dramatically in recent years making the gains lower.

Not brave in my case, we it was a while back. I'm just saying each situation is different.

Paulie Gualtieri · Sep 15, 2024

dazzer6666 said:
It’s the opposite - banks will get hammered by the regulators if they let LTV ratios get too high.

That and also restricted on the % of their book which is set aside high income multiples

Eric the meek · Sep 15, 2024

happypig said:
The biggest problem for a lot of younger people is pulling the deposit together; I know several people in the 30-40 age group that are paying more in rent than a mortgage would be.
The government needs to be pushing the banks to provide mortgages with much lower deposit requirements.

If you think about it, the rentals that exist on the market, if mortgage-backed, only exist as rentals because the landlord can make a post-tax profit because the rent exceeds the mortgage!

Therefore it follows, that a substantial number of renters in whatever age group you look at, will be paying more in rent than a mortgage would be. They are what have created the buy to let market.

The problem for younger people, ultimately, is that there are too many of them. And they are chasing too few properties in both the rental and owner-occupied tenures.

Eric the meek · Sep 15, 2024

Herr Tubthumper said:
The product I have can be transferred to others.

Thinking about this a bit more, I guess it is good business for the bank as they can retain customers long term if they keep the products within the mortgage reasonably competitive.

May I ask, is this product a residential mortgage or a buy to let mortgage? Asking for a friend.

Weststander · Sep 15, 2024

Triggaaar said:
That's not true. As one example. if you buy a property to let it out, you can claim tax credit on your mortgage interest payments, and it's not helpful if those payments go down because you have a repayment mortgage.

Another example would be if you can buy the property you want with an interest only mortgage, but couldn't with a repayment mortgage.

Another example is when you're able to invest the money you save in a better way than paying off your mortgage.

Worth noting thar BTL interest tax relief is restricted to the 20% basic rate only.

Triggaaar · Sep 15, 2024

Weststander said:
Worth noting thar BTL interest tax relief is restricted to the 20% basic rate only.

And 20% is above 0%

Herr Tubthumper · Sep 15, 2024

Eric the meek said:
May I ask, is this product a residential mortgage or a buy to let mortgage? Asking for a friend.

It’s residential.

zefarelly · Sep 15, 2024

Eric the meek said:
If you think about it, the rentals that exist on the market, if mortgage-backed, only exist as rentals because the landlord can make a post-tax profit because the rent exceeds the mortgage!

Therefore it follows, that a substantial number of renters in whatever age group you look at, will be paying more in rent than a mortgage would be. They are what have created the buy to let market.

The problem for younger people, ultimately, is that there are too many of them. And they are chasing too few properties in both the rental and owner-occupied tenures.

I disagree . . . A letting market has always existed but in the last 30 years its become a debt driven industry/business rather than a long slow return on investment/inhreritance . . . . greedy boomers have helped create more of a problem for their own children/grandchildren.

the buy to let industry has created the problem and should have been hammered early doors . . . . . But ther nation having flogged off its housing stock and then MP's with property portfolios having backed development schemes and got in on the cheap wouldn't have that would they.

Sirnormangall · Sep 15, 2024

I think 40 year mortgages will help youngsters but I’m not sure it’s a novel idea. My wife’s first mortgage (34 years ago) was for 35 years on the much maligned endowment basis. The policy matures soon and it whilst we stopped using it for paying off the mortgage some time ago, it will be interesting to see if the value exceeds the mortgage…….though I’m not holding my breath, because it won’t!

pocketseagull · Sep 15, 2024

happypig said:
I know several people in the 30-40 age group that are paying more in rent than a mortgage would be.

Currently in the process of buying my first home and the mortgage for a 1 bed is £200 p/m less expensive than the tiny studio I'm renting. It's honestly pretty ridiculous that in this country it's now the norm to be spending more paying off landlords mortgage and having nothing to show for it.

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[Finance] 40 year mortgages

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