Are 50-year mortgages a good idea?

Are 50-year mortgages a good idea?
Chris J. Ratcliffe/Bloomberg

The UK government is currently considering “ultra-long” mortgages as one of the “creative ways” it could help more first-time buyers afford a home.

Speaking to reporters during a trip to Madrid for the Nato summit last week, prime minister Boris Johnson said Downing Street was “certainly” looking at mortgages which could be passed from parents to children.

Reports have since suggested such mortgages could last up to 50 years.

Longer term mortgages are not common in the UK. While a number of lenders now offer 25-year fixes, the maximum fixed term on the market is currently 40 years.

Elsewhere around the globe, however, longer term mortgages are offered as standard, for example, Japan is home to lenders offering fixed mortgage terms as long as 100 years.

The UK government’s latest considerations follow other ideas, such as how the country could blend renting and owning a property.

Housing shortage

Some brokers have accused the government of ignoring the real problem - the lack of housing supply - while others reckon there is a bigger opportunity in 30-year fixed mortgages, labelling a 50-year term too expensive in the long run.

Director at Harmony Financial Services, Imran Hussain, said: “50-year term mortgages are a cop out from the government when there simply aren’t enough houses being built.

“Which smart person thought, ‘well houses are already 10 times people’s incomes in most cases, but let their kids keep paying the same mortgage in future’?

“The government needs a proper plan to get more houses built rather than putting obstacles in the way and work with builders to encourage proper skilled labour to speed up construction. There should be a proper focus on building affordable housing now more than ever.”

Business groups and councils have warned the UK government it will miss its manifesto target of building an additional 300,000 homes a year by the mid 2020s, calling the target an “unrealistic goal” for English cities.

The government has put planning reforms on hold, despite worries that what is going to be built by the mid-2020s has to have planning permission now, and still does not.

Managing director of Manchester Money, Chris Barker, said 50-year mortgages were “not ideal” but that it could help some people afford a house in the short-term.

“If it means someone can buy their own house and payments are significantly cheaper than renting, then for sure they are a good idea,” he said.

“Although it’s probably being used as a political tool for votes rather for the common good of the general public.”

Founder of brokerage firm Hudson Rose, Graham Taylor, agreed increasing access to credit is “an easy fix” and could have negative repercussions for prospective borrowers in the future. 

“It could ultimately lead to house prices increasing further,” said Taylor.  “The intergenerational mortgage model from Japan has been mooted but we also need to remember that culturally we do not tend to live in intergenerational homes in the UK, so this may have limited appeal."