UK Goverment keen on 50-year mortgages
independent.co.uk
independent.co.uk
I was so intrigued i read TFA… turns out this is an entire article conjured out of an off hand comment in a far larger conversation that wasn’t about this topic:
Boris: blah blah blah Reporter: blah blah Boris: blah blah blah Reporter: would that include multi generational mortgages? Boris: yes, i’m open to any ideas Reporter: back to unlrelated blah blah
No wonder journalism gets a bad rap.
In this scenario, the government gets to say - “ahhhh…it was just an offhand comment”, whilst checking whether it moves the needle for a demographic now quite hostile to the Conservative party.
Also - not really journalism, but some form of propaganda. The owner/editor of this paper is a big supporter of Boris Johnson and was made a lord for his efforts.
To which extent, I also sometimes wonder if this is how a population is softened up to bad policies: firstly it’s trailed as an outside possibility, before it’s progressively brought in from the cold, such that when it lands there is little emotional pushback, just resigned acceptance.
There are several governments known to operate this way. Vietnam is a notable example. They always drop some feelers before enacting policy.
They're the ultimate regulator of the mortgage market - as with most nations with elaborate financial systems these days - and will decide what mortgage products may be offered to consumers or not.
I suggest renters who believe in housing long term buy REITs until they can afford to buy.
> "when the real cause is well-understood"
I don't know what you are thinking there, but a lot of people suggest "not enough homes" is the real cause and "build more homes" is a solution; but most people in the UK live in a home, there aren't very many homeless, and there's not much benefit in having so many houses beyond a bit of slack in the system, building tons more of them just to sit empty year on year would be a waste. The real cause is not a single cause - the homes people live in tend to be owned by landlords instead of themselves, cheap credit means people can borrow more to buy houses so they can outbid others, pushing others to borrow more in response, pushing all prices up. The rise of buy-to-let mortgages helping people afford more houses now than they could in the past, increasing competition and pushing up prices that way. Inflation and the devaluing of the £, if the value halves in real terms then a £50k house becomes a £100k house and appears more expensive. Pension funds and private investments allowed in the housing market where commercial groups can throw around a lot more money than individual buyers and pay more for the more desirable properties. Competition among estate agents incentivised to present houses as worth more to get more commission; council tax, rates, and some taxes being adjusted based on house value/size/location and cheap credit meaning people can borrow to have a kitchen redone or an extension built - many small incentives like that for different groups to increase the value or argue that the value is higher than (some previous level) for their benefit. The ability for wealthy foreigners to buy property in the UK which they don't intend to live in, but want to use as some kind of diversified asset portfolio or laundering (e.g. a house valued in Pounds Sterling, instead of a bank account valued in Rubles or Renminbi) rather than the government acting to keep houses for habitation and nothing else, the rise of personal cars in the last fifty years meaning people can commute long distances into London so they are willing to pay more for a house in a village than anyone who wants to live and work in the village can afford...
There's all kinds of causes and influences; there's only two ways out that I can see - either a sweeping change to houses for habitation only not investment or landlording or anything, which will collapse a lot of people's wealth and be extremely unpopular, or a devaluing of currency until a half million pound house is something anyone can afford because that's not much money anymore.
This is a but misleading. By the sound of it, the inheritors are choosing to take on the asset and debt at the time of issuance. The deceased cannot choose to just saddle their inheritors with their debt without their signature on the loan.
What's to say 50 yr won't do the same? Unless supply is going to be seriously addressed, this is simply another gov New Coke program. First sip tastes good and then it degrades over time to the point it needs to be euthanized.
But a 50 yr "sure thing"? What banker won't love that? Nice job Boris.
† Build Absolutely Nothing Anywhere Near Anyone/Anything
Japan tried to push 99 year mortgages back in the 1980s and they didn't last long until their property values collapsed.
The failure to see the pattern is a failure of the US higher edu system. The irony funny. Sad but funny.
The gov making cheap loans more available doesn't increase availability. It simply drives up price. Which means more larger loans, etc.
The only winner. The Banks.
Boris is doing this so he can delay the collapse of the economy btw.
House prices are mostly determined by how much leverage people can get to buy them. Look for example at unmortgageable houses (eg. due to construction type or land covenant), and they are around 5x cheaper for a similar living space.
House prices must continue to rise, or the debt-tower collapses, and everyone ends up penniless. Some people say thats what they want, but a real uncontrolled housing collapse would be far worse than 2008, and would likely end in a multi-generational economic downturn.
Successive governments have taken lots of moves to maintain high prices - "help to buy" ISA's, shared ownership, small downpayment mortgages, 'affordable' housing, etc.
Those things are also very politically convenient because to the layperson they seem like ways to make housing more affordable, when in fact the market result is house prices rise further.
Will there ever be an end to the rises? Maybe not... Inflation in the British Pound has gone on for hundreds of years. House price inflation can do the same. Will they continue to rise faster than inflation? Maybe... If you can construct more and more elaborate ways to get higher leverage. There are lots of options left, like for example the government could back mortgages with interest rates below market rate.
The school of thought that I subscribe to in economy is that everything is priced in. Relaxing the terms of lending increases risk, drives up the price of said mortages und amplyfies the fallout in times of market turmoil.
Edit: Reread your comment, we are in fact in agreement.
> House prices must continue to rise, or the debt-tower collapses, and everyone ends up penniless.
It's not a smart move. Price cannot and do not trend in one direction forever. This is natural force to discover market clearing prices and thus efficient resource allocation. The only difference is how bad the pullbacks are.
Just ask any central bank which has lost a battle against the free markets (which is all of them). It's much more costly.
Young folks in the U.K. already have it hard enough. Nothing is going their way.
I see other in this thread maintaining that this sort of thing is normal. Well I think they’ve been conditioned to think it’s normal. To me it’s not normal to pass on debt to children. We’d all prefer to pass on wealth to our children.
U.K. need to address the issue of supply. They also need to address the issue of individuals building up so called property empires. Our whole perspective around housing in U.K. has to change. It’s an utter mess.
I agree he certainly is trying to prop up those prices though.
It is a common enough scenario when someone dies prematurely even with "usual" 15-20-25 years mortgages.
I am not sure to understand, maybe Italy is the outlier, here after someone dies, the heirs (either determined by the Law or nominated in a will) either accept or refuse the inheritance "as a whole", and the inheritance is composed of credits (like money in the bank, estate/houses, other properties, etc.) and debts (including mortgages, debts or loans taken from privates, past unpaid taxes and similar, etc.).
In most cases there is not (anymore) a mortgage on the houses, but if there is, all obligations are part of the inheritance and are passed on to the heirs (if they accept the inheritance).
There are "special" life insurance policies that cover the residual mortgage repayments in case of death, and while many (I believe most if not all) banks will require one of these they are not mandated by Law, so it may happen that the morthage debt is transferred to the new proprietor(s) of the estate, i.e. the nominated heir(s).
It is not common that heirs refuse an inheritance as usually the overall balance is positive, but it can happen, in these cases (like the case where there are no known heirs) the whole inheritance goes to the state, that proceeds - as you said - to liquidate the property and repay - in whole or partially - the debts.
you will own nothing, and you'll like it
My favorite quote
You can only fix the interest rate for 3-10 years at a time though.
But it's partly due to the Bostadsrätt system where you own like the right to an apartment in a co-op rather than the actual physical building.
Renting in Sweden is completely terrible (unless you're lucky enough to get a first hand contract - mandatory rent-controlled rents), so it's nice to have a middle-ground where you don't need a lawyer, etc. and deal with building issues and property tax, at the cost of paying the board maintenance. This has also helped to control prices a little (until COVID) by preventing absentee landlordism being profitable (or even possible in most cases).
The first hand contract system really sucks though, as it means you're always kind of subsidising those lucky enough to get a first hand contract. For example you might be paying 40% income tax (and 25% sales tax, and then your mortgage) which is then used to bring in unskilled, uncooperative criminal "asylum seekers", which the government then provides a subsidised first-hand contract to in your neighbourhood so they can commit crimes in your area - and you've paid for all of it!
Well, presumably they're subject to regulation that comes either directly or indirectly (i.e. quangos given a remit and some framework and direction) from the state? That's all I meant, I know the mortgage itself isn't issued by the state, that's a foreign idea to me too.
Every country hates on its poor in different ways: in the USA it’s the lack of healthcare, in the Uk the lack of long term fixed rate mortgages.