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Half a century of debt with ‘gimmick’ 50-year mortgage terms

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Written by: Lana Clements
04/07/2022
Children could inherit their parents’ mortgage if ideas being explored by the government become reality. But experts warn it could push house prices higher.

Mortgage terms of up to 50 years which could be passed between generations are reportedly being considered by Number 10.

The longer loan would mean homeowners could borrow more and still afford their repayments.

Ultra-long mortgage terms is just one avenue the government is considering to tackle the housing crisis.

Boris Johnson told reporters the government wants to “find all sorts of creative ways” to help people own a home.

He added: “We need young people to have the confidence, to have the deposits, the mortgage packages to be able to get into ownership. If you’re good enough to pay a lot in rent, we should find ways to help you to convert that into a mortgage.”

Longer mortgage terms are a great idea, according to Joshua Gerstler, owner of advisers The Orchard Practice.

He said: “It will enable more people to get onto the property ladder as they can spread the cost over a longer period and therefore the monthly repayments will be lower.

“The downside is that they could be paying a mortgage for most of their lives.

“However, this is preferable to paying rent for their whole life as they will benefit, hopefully, from the growth in house prices.”

Push up house prices

However, many critics pointed out the scheme would likely further inflate house prices, putting them further out of reach of the very people they’re trying to target and help.

Dominik Lipnicki, director at Your Mortgage Decisions, said the idea is a ‘gimmick’ by the government.

He added: “Allowing people to borrow more is not the answer, we need a house building revolution and a housing minister who is allowed to stay in his job for longer than a year.”

Graham Cox, director at the Self Employed Mortgage Hub, agreed that values are too high.

“Is this really what we’ve come to, expecting people to sign up for half a century of debt, simply to prop up prices. As ever, the only beneficiaries will be the banks and housebuilders.”

Mortgage market evolving

However, longer mortgage terms could work for younger borrowers, according to Scott Taylor-Barr, financial adviser at Carl Summers Financial Services.

He said: “In theory, there is no limit that could be imposed on the term of a mortgage, provided that the borrowers have the ability to maintain the payments.

“So a 50-year term for a 20-year-old would see them getting to age 70 at term end, many 20 somethings are already saying they can’t see retirement before that age, or even 75 in some cases.

“This is more the mortgage market evolving with the changes in society and our attitudes to our working life than anything more radical.”

He added: “My concern would, however, be that this would fuel further house price growth, rather than solve the problem at the root cause: we don’t build enough houses in places people want to live.”

Rhys Schofield, managing director at Peak Money agreed the government simply needs to build more homes.

“Until we do, getting on the ladder just becomes a more distant prospect for many.”

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