Should 40 year mortgages be banned?

[DistinguishedSocialCommentator]

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

Why dont you sell your rental properties OP, 25% below market value should do it. You can be the pioneer of reducing house prices.

Surely the actual fact that you need to take FOUR DECADES to pay for a house should have people asking questions.

Do you mean to say that one person would take forty years to build a house with his/her own hands?

Or twenty years with a friend and you help the friend build his/her? Or similar division of labour with a third person (brickie, decorator, sorting out utilities + planning permission...).

Dig into the economics, people.

I’m old enough to remember Gordon brown suggesting this back when he was chancellor!
I am neutral about it. It could be a good thing if people are responsible about overpaying at times when they have extra cash so they can revert to a lower payment say during the child care years. Over 40 years there’ll definitely be times when overpaying is easy and times when it isn’t .

YABU and sound incredibly out of touch.

Everything is designed to prop up prices and fuel continued rises. Extending the mortgage term, (lower mortgage rates too), partial ownership schemes, stamp duty holidays. You need to have people buying "affordably" as that feeds up the "chain" .

I think a mortgage which goes into retirement will give people a lot more security than private renting at the same age.

Plus over 40 years you could potentially remortgage 20 times so plenty of opportunity to bring number of years down!

I note OP not addressing the very valid point made about affordability criteria and how stupid they are. Making lenders take into account a history of paying rent at approximately 25 to 30% above the prospective monthly payments would make a huge difference to people looking to buy a house.

40 years is too long - and many don't know these days ie not fully digested the small print about "early repyaments" are often limited

I would have lost my home after my relationship breakdown if it wasn't for the 40 year terms - people aren't signing up for thousands of pounds in additional interest for fun, they are doing it because its a way to survive.

Also what's your issue with early repayment limits - mine is capped at 10% of the total loan in a single year. I don't think that's overly scandalous, that's a lot of money to be able to overpay - or are some people getting capped much lower?

I suspect that many people who take the 40 year mortgage will decrease the term when they remortgage so they will be used as a stepping stone to get on the ladder quicker. There will be people who stick with the 40 year term so they have more disposable income over time but that is their choice.

Very disingenuous for you to post this when you own more than one property. Banning BTL will have a bigger impact on house prices than banning 40 year mortgages.

I don't think it's a question of whether they should be banned or not, it's a question of why are they needed in the first place. You don't need a long mortgage term to increase prices, larger housing stock and increased demand does that just fine. Longer mortgage terms mean that people can afford the repayments and can afford to buy a house. There is no advantage to banning them. You're trying to address a symptom of a problem instead of the underlying cause. I know what the cause is, but I'm not stupid enough to say it on here.

You own three properties mate. I agree that people should not have to pay a mortgage for 40 years in order to own a house. But people like you are the reason why they do. Sell your rentals if you're so concerned.

People are working much longer and houses are far more expensive. It makes complete sense.
Nowadays a 26 year old taking out a mortgage won't be retired yet at 66 when the 40 year term is up. If they would prefer lower monthly repayments with a higher overall return then that's their choice. Some people would rather spend their money more whilst younger and in better health than have their mortgage paid off by 55.

I have a 30 year mortgage to retirement age. Would be longer if I could. I've just released equity to do some work and make my flat top spec. Including the extra I pay £411pm mortgage. The flat below me pay £950 in rent.

40 year mortgages along with other "financial innovation" such as interest only mortgages and practices such as leasehold houses and help to buy just exist to make the unaffordable affordable and prop up house prices. We would be far better off as a country if prices were allowed to fall to a level where buyers could afford them, but unfortunately there is a massive VI biased towards those who already own property by politicians from pretty much every party.

Actually extending a mortgage to a 40 year term doesn't really have that much effect on affordability, because increasing the mortgage by more and more years has less and less of an effect on the monthly repayment amount. Of course it has a significant effect on the amount of interest repaid, so quids in for the bankers off the backs of struggling families working to afford a home.

Personally I think they would be far better off restricting the income multiples on borrowing. I think this is done at the moment in the Netherlands. But my guess is that in doing this they would probably crash the housing market and the hordes of (mostly older) VIs would vote out a political party that did that double quick.

You forgot to mention (to get the full bingo card of out of touch crap) that if they cut out buying avocados and takeaway coffee they'd easily be able to pay their mortgage off 10 years early and have a few rentals just like you OP.

I think they are a great idea to make home ownership affordable for more people.

If you had a 20 year mortgage and you decided that you wanted to double the term length to 40 years, you're spreading the cost and thus paying a bit less each month. I overpay mine to get it down faster. I sat and totted up the numbers recently and found I'm still paying much more in tax, but that's another issue.

My mortgage is on a fixed term which comes to an end at the beginning of next year. It's also an election year, so it's possible the interest rates will be cut as much as possible to get the votes in, so I'll either continue as I am, or, pay the remaining balance off as I fortunately have been able to get myself in a robust position to dump all my savings into it if the proverbial excrement hit the proverbial air circulation system.

We need to build more houses to help house prices to drop. We need to try everything possible to reduce house prices. 40 year mortgages will fuel house price rises and is part of the problem, not the solution.

Young people might not have a choice! Clearly a Tory toff!

YABVU...
I have a 38 yr mortgage. Normal family home, mid terrace, small garden. My childcare cost for one child is the same as my mortgage so lenders say I can't afford a shorter term. Lender also argued that I'm unlikely to retire before I'm 69 so a longer term is more "affordable".
Renting in the same area is £300 pcm more than buying so that's not an option.

My parents bought a near identical house in the early 80's on one salary, for less than £20K, paid it all off within 16 years and brought up two kids without breaking a sweat....

I'm just hoping interest rates drop so more can be paid off. At the moment the majority of my monthly mortgage payment is going on interest not repayment.

I agree with this.

As has been posted upthread, many people pay more in rent than a mortgage on the same property. That rent is not age-related.

I read on MN frequently, how our elderly need to sell property to fund care, and I agree with that entirely , but as more people age as unsecured / private renters, then that option will diminish, and guess what? The younger working population will have to pay through taxes.

I agree that a 40 year mortgage term would not be my first choice, but I value having the security of my owned home, so if that had been what it took, then I would have gone with it.

Alternative view: in Sweden it's quite normal to take out a 100 year mortgage when you buy a house, because it's effectively a kind of stable renting. You own the property, you can do what you like to it (as much as any mortgage holder can), and you have low, controlled payments for your lifetime without needing to save a huge deposit or pay unaffordable mortgage rates or unaffordable rent. When you die your legatees can take on the mortgage or sell and pay it off with the proceeds.

Of course that only works because they've got free childcare, excellent state pensions and elder care, and a society where property wealth isn't something most people are determined to leave to their children (in part because those children can in most places outside Stockholm easily afford decent housing and a good life on normal salaries). If we didn't have a society where the only way to have a good life as an older person is is own a large house outright to compensate for a lack of pension and to ensure funds to pay for care, house prices might be more normal across the board here, because houses would be homes not high-growth investments.

Alternative view: in Sweden it's quite normal to take out a 100 year mortgage when you buy a house, because it's effectively a kind of stable renting. You own the property, you can do what you like to it (as much as any mortgage holder can), and you have low, controlled payments for your lifetime without needing to save a huge deposit or pay unaffordable mortgage rates or unaffordable rent. When you die your legatees can take on the mortgage or sell and pay it off with the proceeds.

Of course that only works because they've got free childcare, excellent state pensions and elder care, and a society where property wealth isn't something most people are determined to leave to their children (in part because those children can in most places outside Stockholm easily afford decent housing and a good life on normal salaries). If we didn't have a society where the only way to have a good life as an older person is is own a large house outright to compensate for a lack of pension and to ensure funds to pay for care, house prices might be more normal across the board here, because houses would be homes not high-growth investments.