[Finance] 40 year mortgages

[Arthritic Toe]

The price of first time buyer homes is driven purely by a supply of buyers able to afford them. In recent years the near zero interest rates have meant that monster mortgages have been available for affordable monthly payments and the entry level house prices have adjusted to this. If 40 year mortgage products were to become the norm, those entry-level prices would adjust to them again driving them yet higher.

There is no pain free way to get back from where we are now. Interest rates need to settle at their long term average of around 5.5% driving entry level prices (and the whole pyramid) lower.

 

[Weststander]

The price of first time buyer homes is driven purely by a supply of buyers able to afford them. In recent years the near zero interest rates have meant that monster mortgages have been available for affordable monthly payments and the entry level house prices have adjusted to this. If 40 year mortgage products were to become the norm, those entry-level prices would adjust to them again driving them yet higher.

There is no pain free way to get back from where we are now. Interest rates need to settle at their long term average of around 5.5% driving entry level prices (and the whole pyramid) lower.

This.

The only solution is supply side (house building) with as many affordables and social units as possible.

 

[Herr Tubthumper]

This.

The only solution is supply side (house building) with as many affordables and social units as possible.

Whilst I agree, most new builds these days look awful. I read an article a while ago about how most companies design and build themselves, the only consideration is cost, and what you end up with is the prison blocks we see today. The alternative is to seperate out the architecture from the build and get something more interesting....obviously this costs. But what's the true cost of a miserable looking building to live in?

 

[Ⓩ-Ⓐ-Ⓜ-Ⓞ-Ⓡ-Ⓐ]

Whilst I agree, most new builds these days look awful. I read an article a while ago about how most companies design and build themselves, the only consideration is cost, and what you end up with is the prison blocks we see today. The alternative is to seperate out the architecture from the build and get something more interesting....obviously this costs. But what's the true cost of a miserable looking building to live in?

I have an architectural background and couldn't agree more - it's awful in this country at the moment. Developers pretty much have carte blanche to build any old crap while raising the "we need more houses for the people" beacon. Same happened after the war and we ended up with a load of suburban crap houses and immeasurable social problems.

 

[Uncle Spielberg]

Most lenders will lend to age 70, some 75 and most will do 35 years mortgages and a few 40 years. For a first time buyer it is a step on the property lader helping with affordability. You can always and should review your present circumstances when a rate eends 2, 3 or 5 years and if affordable can always reduce the mortgage term then

 

[Herr Tubthumper]

I have an architectural background and couldn't agree more - it's awful in this country at the moment. Developers pretty much have carte blanche to build any old crap while raising the "we need more houses for the people" beacon. Same happened after the war and we ended up with a load of suburban crap houses and immeasurable social problems.

I went to the Spurs away game a few seasons ago, the one where we won 1-0 in the last minute. I used to travel through Tottenham Hale in the mid-90s and decided to take a look. It is now swamped with grim looking cheap high-rise residential blocks. The ones around Brenford's ground look awful as well. This really is not the solution.

 

[Papak]

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.

That £200 pcm differential won't go far when there is letting agent fees, voids (no rental income and full rate council tax), buildings insurance plus any repairs and maintenance etc.

 

[Paulie Gualtieri]

Quite a variance across Europe in the % of houses that are owner occupied.

The UK is roughly 65% for balance

I don’t have the split on public and private rental numbers but did assume there’s probably caps in price for rental fees across the public stock

 

[lost in london]

Interest only is a mugs game at the moment in England.

For some maybe, but not everyone. Our mortgage went up about £800 a month recently coming off a 5 year fix, just about affordable but it's close. Moved to interest only and overpay by £800 month whenever we can, only missed one month so far.

 

[happypig]

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.

The worst of it is that if you're on benefits then the housing benefit is paying the landlord's mortgage.

 

[Bakero]

The worst of it is that if you're on benefits then the housing benefit is paying the landlord's mortgage.

Which of course means that the tax payer is paying off the landlord's mortgage. What a system.

Remind me what percentage of MPs are private landlords?

 

[Herr Tubthumper]

View attachment 188968

Quite a variance across Europe in the % of houses that are owner occupied.

The UK is roughly 65% for balance

I don’t gave the split on public and private rental numbers but did assume there’s probably caps in price for rental fees across the public stock

Germany being bottom doesn’t surprise me. Switzerland’s low ownership does though. I wonder what the reason is.

 

[Eric the meek]

Quite a variance across Europe in the % of houses that are owner occupied.

The UK is roughly 65% for balance

I don’t gave the split on public and private rental numbers but did assume there’s probably caps in price for rental fees across the public stock

I make the UK about the same as the EU average. I'm not sure what I expected, but I didn't expect that.

 

[mikeyjh]

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.

Financially, it kind of makes sense that the cost of renting exceeds what the landlord is paying out - Morally, however, it's pretty repugnant. Amateur landlords, in particular, seem to think that it's okay for all expenses to be passed on to the tenant. Hearing some of the moaning when interest rates were going through the roof made my blood boil - You're getting the reward of the income, you should bare the risk that's associated with it.

 

[Paulie Gualtieri]

Germany being bottom doesn’t surprise me. Switzerland’s low ownership does though. I wonder what the reason is.

I looked it up as someone had told me years back that home ownership was much less an objective in Europe than it was over here, the numbers don’t obviously show this across the board though.

Can only assume in Germany it’s driven by demand and supply post war and maybe some renter protection in rates / tax etc?

Switzerland the average age of a FTB is 48 so must be driven by house price

 

[Super Steve Earle]

Most lenders have a top borrowing age of somewhere between 75-80.

Concerningly forewarns that this is the age range where a lot of lower-earners will need to continue to work to before their State Pension kicks in.

If you think the UK system is a bit much now offering 40 year solutions - take a look at Switzerland, where some banks will do… 125 years…

After 75/80, they could switch to a lifetime/equity release/interest only mortgage till they die or sell up to go in to a home.

 

[Springal]

Interesting to see - especially the high street lenders offering this with sensible-ish rates. I probably need to upsize next year unplanned but the market looks to have a bit of a void between where we currently our and the kind of property I’d want to move to being a bit to much of a financial leap but this could be a solution.

 

[Weststander]

Germany being bottom doesn’t surprise me. Switzerland’s low ownership does though. I wonder what the reason is.

https://www.fgp-swissandalps.com/why-is-homeownership-so-low-in-switzerland/

 

[Weststander]

I make the UK about the same as the EU average. I'm not sure what I expected, but I didn't expect that.

Perhaps because some Brits with an angle and no knowledge have always said “home ownership isn’t really a thing on the continent. People happily live in rented properties with tight rent controls”.

They extrapolated a sizable section of German society, falsely making it European wide.

 

[Eric the meek]

Perhaps because some Brits with an angle and no knowledge have always said “home ownership isn’t really a thing on the continent. People happily live in rented properties with tight rent controls”.

They extrapolated a sizable section of German society, falsely making it European wide.

Yes, you could be right. 'Received wisdom' from people who don't know any better. As I say, it is interesting to see that for all the moaning and finger pointing, the UK is right on the average of 27 EU countries.

Thanks for the Swiss link by the way. At the back of my mind, something told me that Switzerland would be bottom of the list. I guess it was something I read years ago and logged away for future reference...