Are very long mortgage terms a good idea and other housing matters?

[ratsintheattic]

Affordability of housing troubles me. As interest only mortgages are taboo for everyone but BTL buyers I was wondering if having a mortgage term of 40 or even 50 years would be a good idea. Renters can definitely afford the interest on a mortgage and the capital repayment would be very slow but better than not at all.

Disclaimer: not landlord bashing. I am one but also dismayed at the fact that what seems the majority of families cannot have the security and freedom of home ownership.

On a separate note, my local authority had just announced it is using £12m to buy one and two bedroom homes to rent at affordable rents. Is this a feasible solution going forward? If LAs bought places with 50% or 60% mortgages they could cover interest and maintenance costs at a much more affordable rent then private rentals.

Just a couple of thoughts. I'd be interested to hear what others think.

The average age of a first time buyer is close to 40. They'd be 90 or dead before a 50 year mortgage is cleared.

Is it a fact that the majority of families cannot have the freedom and security of home ownership? Where do you get that statistic from?

OP says what seems the majority and if you go by mn that would seem the case.

We bought very easily in London in 2011. We are hard pushed to buy again now, even within commuting distance (we are currently zone 3 and have looked past m25)

noarmani the reason 40 is the age of average 1st time buyers is because of this problem. Fixing the affordability crisis would lower it. (Also that figure is artificially high because it includes right to buys that are often done by an older demographic than 'normal' ftbs)

wowfudge

I've recently seen a graph showing that it's predicted 25% of families with DCs will be in private rents in the near future.

That isn't in children's best interests and is a problem the whole of society should be tackling.

I think it's an assertion which needs backing up with facts though. It could be completely wrong.

25% of families isn't the majority of families, but at least it does quantify the number. I also disagree that private rentals are fundamentally wrong for families. We're fixated on home ownership in the UK. If you go to many European countries, renting is the norm, ownership is unusual.

I do agree that the rental sector needs to be regulated.

I do not have facts as such. Average wages compared to average house prices means that most people on close to average incomes will not be able to afford a house. I am probably using threads I have read on MN as an indicator of the problem. Also, I know I couldn't afford my own house anymore and I'm a relatively high earning professional.

A mortgage that runs until someone is 90 could be better than none in that:

• you are at least 'on the ladder'
• you are building equity in the amount you are paying off and possible increases in value.
• elderly renters would need support and possibly be vulnerable to eviction or homelessness. Elderly mortgagees may be easier to support and less vulnerable.

I think it's easy to say you disagree with the assertion that private rentals aren't good for families wowfudge. But have you ever experienced it? If you have, you'll know about the uncertainty and insecurity it brings. You'll know that you're home can be sold from under you at any time leaving you unable to find another home close to school. That's exactly what happened to us last year. Within 6 months of a one year let the landlord put the house up for sale. The letting agency said it was a breach of contract but couldn't do anything to stop him. Then we were almost homeless because so few rentals were available in the area. We found another house eventually but did everything we could to buy a house after that. We have now bought a house, it was very hard to pull the money together to do so but felt we had no option, rather than being moved on every year to six months.

It's also easy to say the rental market needs regulating but how can this be done without making it so unattractive that we lose private rental stock, thus pushing up prices. What is needed is social housing as competition, but that's as rare as hens teeth. Even when we were close to homelessness with three kids the council couldn't help us.

noarmani the reason 40 is the age of average 1st time buyers is because of this problem.

Really? I thought it was more to do with the issue of having to raise a large deposit than the length of mortgage terms.

Although renting is more common on the continent, in my experience tenents have far more protection than they do in the UK which makes it a much more palatable alternative for families.

Doesn't the word mortgage actually mean 'death deed'- as in, originally it wasn't expected to be paid off during your lifetime? Of course, one wonders how a retiree would manage to continue paying the mortgage unless they have very good pension provision...

Journey yes I do have experience of renting and have had to move when a landlord wanted to sell. Please re-read what I posted - I stated I didn't think it was fundamentally wrong. I also don't believe the current unregulated rental sector works for a lot of people.

If your former landlord sold and you were out before the 12 months were up then that should have been dealt with as it was an illegal eviction, if that's what happened. If he put the place on the market part way though the tenancy then there's not a lot you can do about that, but you do not have to allow viewings; it's your right not to. I would hope your LL had the decency to let you know his plans rather than just putting the house on the market.

so if you had a long mortgage you would have security of tenure now and perhaps be in a better position in old age?

So what would happen to those unpaid mortgages when people died? Would homes be taken back by the bank? Life insurance payments would increase enormously or else children would be saddled with their parent's debts.

How would people afford mortgage payments on the miserly pensions that most of us will be on in our old age?

I've been thinking about it some more and I reckon people in retirement could

• enter into an agreement with the government whereby they get a lifetime interest in their property and free housing in retirement and the government inherits the property on their death for future social housing.
• maybe have paid off the mortgage with overpayments.
• downsize to a cheaper retirement property (in my area retirement properties are significantly cheaper).

In the meantime people can choose when and where to move, what colour to paint the walls etc.

What do you think will happen to renters in old age? How will they afford rent on a miserly pension? It's a problem whether people rent or have a mortgage.

As an example someone borrowing £300k over 40 years would pay £1075 per month at an interest rate of 3% and after 25 years would still owe £155k. Depending on house price inflation this could represent a very small proportion of the property's value.

I'm trying to look for solutions which give people the freedoms of home ownership that many desire.

The average age of first-time buyers is thirty. It says so here in the Guardian right down in the final para.

So it's not quite as dire as has been claimed. House prices are bloody mad, though: our first house is now on the market for four times what we paid for it 18 years ago.

Serious question.....how do retirees afford a rent of £500 plus if they rented all their life and have little more than state pension? Where do they sit on the priority list for council housing? Doesn't seem feasible to live on a pension if you are not already a home owner....that for me is just one of the reasons why buying is a bit of an obsession.

I am thinking about a long-term mortgage to enable us to move house - would mean repayments are lower while dcs are small, and when they are a bit bigger we won't be paying childcare fees anymore (which are more than our current mortgage) so could take out a new, shorter term mortgage. We get a new mortgage every three years or so anyway.

Those of us with mortgages are often told we'll be able to increase our pension contributions once we've paid off our mortgages in later working life.

Talking about "average" house prices though doesn't really make sense, as different areas of the Country are so different, it doesn't help to lump everybody together.

To some extent, that is the same with wages too - one or two people on a very high wage, take many, many, many low income families to 'balance out' that average.

People being able to buy is also something that is now influenced by inheritances, which is a newer phenomenon for a lot of the population, as pre-war, far fewer people owned their own homes, to have anything to leave to their children when they died.

how do retirees afford a rent of £500 plus if they rented all their life
They are eligible for housing benefit. This can mean that a single retired person would have to move from (say) a 2-bed to a 1-bed property.

Renting is far too insecure in this country. Ridiculously so. I'm lucky we could afford a mortgage - I couldn't bear the insecurity if we were renting with our two young children.

Iggi999 we did that - had a 35 year mortgage while we were paying nursery fees, then each remortgage since we have whacked down the term.

We couldn't go beyond 35 years as the bank required us to have paid it off by retirement. That doesn't make sense - actually you need the amount owing at retirement to be smaller than the difference in value between this property and a one bed flat that you can downsize to.

The general idea would make the most sense for 25-30 year old who have a reasonably reliable future career trajectory with decent payrises but could also work more widely.

I believe I heard that in the USA it's possible to arrange very long term mortgages which are intended to be passed down through generations - is that true?

That's very interesting Fish - one worry I have is that the "nursery money" will be needed elsewhere and swallowed up, so that we never do have extra for the mortgage!

In my example above the worst case would be having to sell the house to clear the remainder of the mortgage and then throw yourself at the mercy of the private rental sector (with the benefit of all the equity built up as savings).

I can't see how it's better to have nothing, no possibility of anything and hope that HB is around in years to come to pay for all elderly renters.

But for me it's not just about what happens when you're old - all of which can be dealt with. It's about creating the stability families need to not live with the threat of having to leave their home at two months' notice.

I get that averages have limited relevance. I live in the southeast so there is probably a higher than average proportion of renters and an older than average age of first time buyer then the national averages.