50 year mortgage insanity

[mumda]

https://www.cityam.com/exclusive-mortgage-guru-colin-bell-on-why-the-fiercely-competitive-market-is-ready-for-a-50-year-fixed-rate/

I know we all live longer and 50% of young people go to university, so perhaps people should have a longer working life, but putting 50 year mortgages on the market would be a sign of a really overheated and insanely debt ridden housing market.

How much of the last bubble's burst banks does the tax payer still own?

I see it as a way to have a bigger house when needed. You then downsize around the time you retire to somewhere mortgage free. I expect us to be in this situation having essentially rented a bigger garden and a fourth bedroom!

i would totally have taken this option. I’d love to free up more money now to enjoy myself and do things like improve my house.

I would do it 54 and not bought a property cos it's £3k a month for a mortgage or £1200 to rent. My parents mortgage is till they are 100 too, taken out a couple of years ago when 75

Seems the sensible option to me. People tend to try and hang on to the past when houses were cheaper - times have moved on and we have to accept houses cost 10x your salary on average. What’s more of a concern is people paying rent which is often the same cost as a mortgage all because they can’t get the deposit together.

I don’t believe people will take 50 year mortgages to buy a large house so they can downsize when they retire. It will be a 50 year mortgage on a house that will already be smaller than they need.
It will work out for some and be a millstone for others. I would not be comfortable to have a mortgage into retirement.

Try doing the sums, there is only a small saving on the monthly payment on a 30 year vs 50 year, but the overall payment to the banks is hugely increased, that's why they want to push them.

Morals have gone out of the window for most people, people would cheer anything that is good for house prices even if it is terrible for young people, just because it improves their house prices.

It's a terrible idea but not enough people will have the courage to say it, much like virtually none of the mainstream media will ever say anything bad about stuff like HTB or SO, despite these being very poor products for most (not all) of the people that take them out.

If you want to make houses more affordable, just don't do any props or suppress the price of money and the market will correct to a new equilibrium.

Let's be honest, most people don't want a new equilibrium even if it is better for the young because that involves lower prices.

Is it that good a deal? As usertaken says isn't the saving so small it's questionable?

Mortgages into retirement are now the norm. Mine goes until I’m 72 I think, although obviously I’ll try to pay it off sooner.

Imagine having a customer for 50 years. How much interest will the banks get from this.

It's a dreadful idea for the reasons given by PP. It will profit banks, housebuilders and anyone who is sitting on a lot of property wealth, but it certainly won't be good for ordinary people trying to pay for a roof over their heads.

Nobody stays with the same bank for their whole mortgage term though. Anyone with any financial savvy would ditch and switch for favorable rates when their fix is up.

Theres only so many banks though. Over 50 years im sure the same cutomers keep swinging buy.

It will allow bigger loans.
It will drive more interest.
Which I turn will fuel property value increases.

(All of which benefit the financial institutions).

It could mean you can buy a bigger house earlier in your career but expect to pay it off in 30, or you can buy when you are single and then pay if off quicker when you have two incomes paying it, or you can keep mortgage costs down when you have under 5's in childcare and ramp up the payments down the line. As a product sounds helpful for some, but I wouldn't want to be paying my mortgage at 80. 60 would be plenty.

How would it help someone buy a house earlier? They'll still need to save a deposit. And they'll still need to earn enough to pass the affordability tests/income multiples etc.

Payments on a 50yr mortgage are not much cheaper than on a 30yr one.

I'm pretty sure this is already a thing in Japan. They have multi-generational 100 year mortgages. Horrifying

The monthly payments are cheaper because there are two parts the interest which won’t change and the capital repayment which will drop as you’re aiming to pay off in 50 years not 30 or 25. If that makes the diffence and you can buy a bigger house and you can jump a stage and buy one less house in your life you will save again. Yes you still need the mortgage but it will cost you less.

If you buy a £500k house with a 10% deposit, at 5% interest, your repayments will be:

50yr mortgage = £2,044/mth (total cost £1,226k)
30yr mortgage = £2,416/mth (total cost £870k)

So yes, it's a bit cheaper per month to borrow over a 50yr term. But the 50yr borrower will pay £356k of additional interest overall! Potentially saving a bit on stamp duty is neither here nor there when compared to that.

Just because people start out with 50 year terms when starting out and to keep payments low doesnt mean it has to remain that way.
People chop and change all the time when deals run out or they move. Terms can be reduced then. People can make overpayments ( usually 10% a year )
None of it is fixed in stone

My DC24 has a 40yr mortgage.

My 90yr neighbour is still paying off a mortgage.

30 year terms can also be reduced. It doesn't change the fact that someone who has a 50 year term for any length of time at all will be paying more interest than someone who starts off with a lower term.