Should 40 year mortgages be banned?

DistinguishedSocialCommentator · 2024-05-13T08:58:03+00:00

Reading and hearing more and more of this. IMO, extending mortgages and making almost a norm re 40 years for many, and it was 25 years when we got our first and second mortgages - 40 years IMO is just fueling the price rises in property *AIBU seeking a ban on 40 year mortgages?? * IMO, 30 yrs is more than enough and there must always be a minimum 10/15% deposit and a 2 year record of saving money. This IMO, will gradually settle property prices. FYI, we paid off on our own property and a couple of rentals about 14 years ago possibly a bit more NB: Of course, no government will agree to that as it will hold back national growth and ledners will definitely fight it as it hits their profits. But 40 years mortgage is more than a life sentence into Our 25 year mortgages we paid off with 15 and 14 years respectively 40 yr metages benefits the lenders bigger profits and feuls property prices [[https://www.standard.co.uk/business/hsbc-40-year-mortgage-deal-interest-rates-bank-of-england-marathon-prices-lender-bank-big-six-b1103513.html https://www.standard.co.uk/business/hsbc-40-year-mortgage-deal-interest-rates-bank-of-england-marathon-prices-lender-bank-big-six-b1103513.html]]

Crikeyalmighty · 14/05/2024 10:38

@DistinguishedSocialCommentator this is why I think house prices in much of Europe are far more stable and don't have as much upward movement- even in many citys- there is often more good quality social housing of all types and lots of big apartments too and people have less of a 'thing' about apartments- even with families. Consequently whilst there is still demand , it's less frenetic both for buying houses and flats . I know quite a few Germans from business who actually rent a family sized 3 or 4 bed apartment in a nice German city in a convenient location but own a flat or small house in Majorca or southern Spain or Turkey etc . We have kind of forced many people into buying sometimes none too great homes or moving areas away from family and friends because of the lack of other options , constant upward price rices and lack of security within the rental market- and masses of private renting has made this worse.

Original poster

DistinguishedSocialCommentator · 14/05/2024 09:22

Pin0cchio · 14/05/2024 07:59

A lot of people on here really don't understand supply and demand.

Property prices have been rising excessively for decades because demand exceeds supply.

This government like high asset values. It generally benefits those already wealthy. They have no interest in prices falling in real terms. So any time prices start dropping (eg now when interest rate rises) they desperately search for demand boosting solutions. Deposit schemes. Shared ownership. Help to buy. 40 year mortgages. Yes it feels nice if the person who thought they couldn't afford is saddled with a vast debt to prop up property prices but it would be better if vastly more homes were built to increase supply and allow prices to fall in real terms - allowing those same people to buy but borrow less.

This also goes hand in hand with more money in their pocket to spend - good for the economy!!

Excellent post
May I add/reiterate that is not just money in "gov's pockets" but that of the mass of lenders, builders etc.

The higher the house price, the more tax the gov get. For every BTL a person buys, even more stam duty/tax for gov.

House prices will rise with 40 year mortgages just like they did when the gov gave a so-called holiday for "first time buyers."

The bottom line is supply and demand, no ifs, no buts.

The gov selling 2 million council homes at, up to 70% discount - millions are sitting on or cashed in hundreds of thousands of pounds depending on when they sold. If you have never rented and always had your own property and buy a rental in order to ensure you are not a burden to the taxpayers ie benefits - the gov is shafting you hard.

To me, in this thread a lot of envy of those who have worked hard and saved a little money and bought a BTL, Some claimed it was "easy xx years ago" so my question was, if it was that "easy" why did many of the 50% that rented at the time buy? The lenders were giving almost 100% loans at the time

OP posts:

Pin0cchio · 14/05/2024 07:59

A lot of people on here really don't understand supply and demand.

Property prices have been rising excessively for decades because demand exceeds supply.

This government like high asset values. It generally benefits those already wealthy. They have no interest in prices falling in real terms. So any time prices start dropping (eg now when interest rate rises) they desperately search for demand boosting solutions. Deposit schemes. Shared ownership. Help to buy. 40 year mortgages. Yes it feels nice if the person who thought they couldn't afford is saddled with a vast debt to prop up property prices but it would be better if vastly more homes were built to increase supply and allow prices to fall in real terms - allowing those same people to buy but borrow less.

This also goes hand in hand with more money in their pocket to spend - good for the economy!!

Sunnyandsilly · 14/05/2024 06:08

ShyPoet · 14/05/2024 01:42

I totally agree. No one needs more than 1 house.

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But they do. People who will never be able to buy need them to own two houses and rent them out, as we have seen what’s happened when landlords are selling up, people are struggling more and more, with increased rents, moving to other areas, in hostels or temp accommodation by councils .

ShyPoet · 14/05/2024 01:42

budgiegirl · 13/05/2024 10:18

40 years IMO is just fueling the price rises in property

As is owning more than one property, surely? How about starting with limiting the number of properties a person can own? Or is that not a good idea because it affects you?

I totally agree. No one needs more than 1 house.

DdraigGoch · 14/05/2024 01:10

a teachers/NHS/etc/etc pay goes a lot further in Blackpool, Bradford, Stoke-on-Trent, Coventry, Preseton, etc,et,c than it does in London

So if all of the teachers and nurses moved north for affordable housing, who is going to teach and nurse the population of London?

DdraigGoch · 14/05/2024 01:08

Mickeymousecoat · 13/05/2024 23:13

This is all true but letting people get 40 year mortgages will mean more people can afford to get on the ladder whereas they couldn’t before. This will push house prices up even further. Is this policy worth it if it does so? I’d be interested in the views of those most effected to whom a 40 year mortgage would appeal - the young renters.

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They were still going to need housing, one way or the other. If a person is occupying a rental house they are increasing the demand for that house in the same way as they would if they bought the same house to live in.

NewName24 · 13/05/2024 23:26

DistinguishedSocialCommentator · 13/05/2024 23:01

That's right, you are "out now" for sure as I NEVER SAID THAT, eh!!!

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There are thousands of empty properties up north - people need to move up there just like we moved from the north to south ie our parents (see my previous post) moved at great financial risk to better their and our futures.

Today, at 14:20

Original poster

DistinguishedSocialCommentator · 13/05/2024 23:20

Alicewinn · 13/05/2024 23:16

I would argue property would still rise without 40 year mortgages, they'll be another route to entry instead. What the market wants the market gets.

True and partucialry with inflation as it has been and is. However, no one can honestly put their hand on the heart and say that the 40 year mortgages wont aid the rise of house prices.

The gov's sweeteners, EG, reduced stamp duty etc - they resulted in prices rising

OP posts:

Alicewinn · 13/05/2024 23:16

I would argue property would still rise without 40 year mortgages, they'll be another route to entry instead. What the market wants the market gets.

JaceLancs · 13/05/2024 23:15

I bought my first house at 23 with an endowment mortgage over 25 years supposedly - due to relationship breakdown sold which gave me a deposit on next house with exDH - due to 2 further relationships ending I’m 60 now and still paying a mortgage which should finish when I’m 67 but due to overpayments will hopefully be 63 - so yes 40 years
Not what I wanted but I’ve not had much choice in the matter

Mickeymousecoat · 13/05/2024 23:13

rinseandrepeat1 · 13/05/2024 22:06

OP I don't mean this horribly but the more the post you are coming off in a really negative and ignorant way. I am on the property ladder however I feel insulted on behalf of younger people with the way you are talking about them and their 'state of the art phones'. You seem very out of touch with the rest of the world.

I posted the below article further up the thread however I don't think you read it. Can you really not see how different times are now?

'Mortgage rates of 6.43% today are equivalent to a rate of 25.7% in 1980 - housing is now at its least affordable since records began.

As details emerged yesterday that the average 2-year fixed rate mortgage is now 6.43%, Leeds Building Society has looked at historical data to calculate the equivalent mortgage rates.

Interest rates of 6.43% may seem lower than the mortgage rates of 15% which borrowers were paying in 1980 for example, but there is a critical difference: surging house prices, driven by a lack of supply and historically low interest rates since the financial crisis of 2008, and the commensurate increase in household indebtedness, mean that the 6.43% mortgage rates of today are equivalent to a rate of 25.7% in 1980 (see Editors’ notes for calculation).

In 1980, the average UK house price was around £21,000 and mortgage costs accounted for 11.3% of disposable income (see Editors’ notes). Today, with the average 2 year fixed rate mortgage on offer to new customers currently standing at 6.43%, those figures are around £292,000 and 45.1% respectively.

Housing is now at its least affordable point since records began. The average home currently costs 9.1 times the average local wage compared to 3.5 in 1997 (Source ONS). This particularly impacts young people. Rates of home ownership amongst 25-34 year olds have collapsed over the last 30 years. In 1996, home ownership levels for this age bracket were 65%. By 2016, the level for this age group had fallen to 27% - giving them the label of ‘generation rent’.'

www.leedsbuildingsociety.co.uk/_resources/pdfs/press-pdfs/press-releases/housing-is-now-at-its-least-affordable.pdf

This is all true but letting people get 40 year mortgages will mean more people can afford to get on the ladder whereas they couldn’t before. This will push house prices up even further. Is this policy worth it if it does so? I’d be interested in the views of those most effected to whom a 40 year mortgage would appeal - the young renters.

mathanxiety · 13/05/2024 23:13

DistinguishedSocialCommentator · 13/05/2024 20:31

All three of our kids have bought properties in London and two of them recently bought BTL's

Whats your point???

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These are the kids earning in the top 3%?

Or do they make an average wage?

Can you understand that there's a difference between average wage and a wage that is in the top 3%, and that this has an effect on affordability of property?

Do you understand that your DCs' and your choice to make money via BTL properties makes it very difficult for others to save for a down payment becaus le theyre paying marjet rate rent to you and yours, and you amdnyour family arr also making it hard to find properties to buy (and perhaps improve)?

Alicewinn · 13/05/2024 23:10

mathanxiety · 13/05/2024 23:02

It only looks like a bad idea on paper.

If you get a long term fixed rate mortgage (the norm in the US) you'll likely find your house is worth more than 2.5x the total mortgage amount, interest included - possibly a good deal more - by the time you finish paying for it. And you can always sell and cash in before it's paid off. You can still come out way ahead even when you factor in the outstanding/ repayment amount.

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Yes this

Original poster

DistinguishedSocialCommentator · 13/05/2024 23:09

To be clear, kindly post your claim where I stated "ALL"

As you know I did not, otherwise, you would have posted it, fact

OP posts:

Alicewinn · 13/05/2024 23:09

rinseandrepeat1 · 13/05/2024 22:06

OP I don't mean this horribly but the more the post you are coming off in a really negative and ignorant way. I am on the property ladder however I feel insulted on behalf of younger people with the way you are talking about them and their 'state of the art phones'. You seem very out of touch with the rest of the world.

I posted the below article further up the thread however I don't think you read it. Can you really not see how different times are now?

'Mortgage rates of 6.43% today are equivalent to a rate of 25.7% in 1980 - housing is now at its least affordable since records began.

As details emerged yesterday that the average 2-year fixed rate mortgage is now 6.43%, Leeds Building Society has looked at historical data to calculate the equivalent mortgage rates.

Interest rates of 6.43% may seem lower than the mortgage rates of 15% which borrowers were paying in 1980 for example, but there is a critical difference: surging house prices, driven by a lack of supply and historically low interest rates since the financial crisis of 2008, and the commensurate increase in household indebtedness, mean that the 6.43% mortgage rates of today are equivalent to a rate of 25.7% in 1980 (see Editors’ notes for calculation).

In 1980, the average UK house price was around £21,000 and mortgage costs accounted for 11.3% of disposable income (see Editors’ notes). Today, with the average 2 year fixed rate mortgage on offer to new customers currently standing at 6.43%, those figures are around £292,000 and 45.1% respectively.

Housing is now at its least affordable point since records began. The average home currently costs 9.1 times the average local wage compared to 3.5 in 1997 (Source ONS). This particularly impacts young people. Rates of home ownership amongst 25-34 year olds have collapsed over the last 30 years. In 1996, home ownership levels for this age bracket were 65%. By 2016, the level for this age group had fallen to 27% - giving them the label of ‘generation rent’.'

www.leedsbuildingsociety.co.uk/_resources/pdfs/press-pdfs/press-releases/housing-is-now-at-its-least-affordable.pdf

This is very interesting, thanks

SecondHandFurniture · 13/05/2024 23:06

I'm also out, before you lie again.

SecondHandFurniture · 13/05/2024 23:05

DistinguishedSocialCommentator · 13/05/2024 23:01

That's right, you are "out now" for sure as I NEVER SAID THAT, eh!!!

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Yes you did.

"There are thousands of empty properties up north - people need to move up there"

And then you doubled down on it. Don't lie when it's black and white. And don't say "Yes well my parents moved to the south etc etc" again because that isn't the point. The point is you said it.

mathanxiety · 13/05/2024 23:02

kitchenhelprequired · 13/05/2024 21:51

If the longer term lowers the monthly payments and therefore allows someone to buy this year instead of in say 5 years time when prices have also increased I don't see the issue. If the alternative is long term renting then again what's the issue? I remember being horrified when taking out my first 25 year mortgage seeing that we would pay back something like 2.5 x the amount borrowed but I'm still glad we did it. 25 year mortgages were the norm for many years when life expectancy was lower.

It only looks like a bad idea on paper.

If you get a long term fixed rate mortgage (the norm in the US) you'll likely find your house is worth more than 2.5x the total mortgage amount, interest included - possibly a good deal more - by the time you finish paying for it. And you can always sell and cash in before it's paid off. You can still come out way ahead even when you factor in the outstanding/ repayment amount.

Original poster

DistinguishedSocialCommentator · 13/05/2024 23:01

Bookworm1111 · 13/05/2024 22:53

You know you did, and I'm out now. It's pointless trying to argue with someone who has zero compassion for the struggles young people face to get on the property ladder. Enjoy counting your BTL thousands.

Edited

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That's right, you are "out now" for sure as I NEVER SAID THAT, eh!!!

OP posts:

Bookworm1111 · 13/05/2024 22:53

DistinguishedSocialCommentator · 13/05/2024 22:46

Please direct me to where I said "all go to the north", eh!! This was a rhetorical question as I clearly did NOT say that, bud!!

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You know you did, and I'm out now. It's pointless trying to argue with someone who has zero compassion for the struggles young people face to get on the property ladder. Enjoy counting your BTL thousands.

Original poster

DistinguishedSocialCommentator · 13/05/2024 22:52

NewName24 · 13/05/2024 22:46

For me, my family, friends and anyone that wants to listen - the sooner you pay of a loan the better.

Nobody is disagreeing with that.
But why are you struggling so much with the fact that many people will take out a 40 year mortgage, but actually pay it off in a lot less that 40 years ?

Thank you. I'm not struggling with that but I fear you have missed a fundamental point, IE, the 40 year trend will only fuel property price inflation and put more money into bankers' pockets

Are you aware they still do interest-only mortgages? Not goo IMO

I'm not sure if endowment mortgages are still around

What needs to happen is that the gov stops selling social housing at knock-down prices

OP posts:

NewName24 · 13/05/2024 22:46

For me, my family, friends and anyone that wants to listen - the sooner you pay of a loan the better.

Nobody is disagreeing with that.
But why are you struggling so much with the fact that many people will take out a 40 year mortgage, but actually pay it off in a lot less that 40 years ?

Original poster

DistinguishedSocialCommentator · 13/05/2024 22:46

Bookworm1111 · 13/05/2024 22:40

As feasible as expecting all low paid workers to move to the north of England?

But hang on, according to you, it's not mortgages, electric, gas, water and food bills that are the issue – it's young people wasting their money on expensive phones, cars and holidays! Make your mind up, bud.

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Please direct me to where I said "all go to the north", eh!! This was a rhetorical question as I clearly did NOT say that, bud!!

OP posts:

Bookworm1111 · 13/05/2024 22:40

DistinguishedSocialCommentator · 13/05/2024 22:37

Then go ahead and "cap" them, bud, ehh!!
At the same time, please "cap" the price of mortgages, electric, gas, water and food. Very feasible😂

Edited

As feasible as expecting all low paid workers to move to the north of England?

But hang on, according to you, it's not mortgages, electric, gas, water and food bills that are the issue – it's young people wasting their money on expensive phones, cars and holidays! Make your mind up, bud.