Homeowners will soon have the option of taking out a 50-year mortgage after new lender, Perenna, was given a UK banking licence.
iNews reported that Perenna hopes its long fixed-rate mortgages – initially of 30-years but eventually of 50 – could help property buyers, but critics warn of higher total repayments.
They added: “At present, the longest mortgage term offered by UK banks and building societies is 10 years, however, Habito recently launched a 40-year mortgage, while Kensington did the same.”
Experts consider the pros and cons of ultra-long mortgages
Advantage has written about how the under-supply of housing has driven up prices, which has priced some first time buyers out of the market. Longer-term mortgages have been touted as a potential solution for those struggling with mortgage affordability, despite raising the overall cost of home ownership due to added interest payments.
Last month the Guardian reported that Downing Street was exploring the idea of trying to tackle the housing crisis with ultra-long mortgages of up to 50 years that could pass between generations, allowing more people to build up equity rather than pay rent.
They stated: “Mortgage experts said the idea could bring some benefits but flagged problems, including the potential to saddle children with debt, and the fact it would not tackle the fundamental issue of housing supply.”
UK mortgage market set to expand by 56 per cent
According to iNews: “A study by economist Dr John Glen in partnership with Together, found that specialist residential mortgage lending is set to rise from £5bn to £16bn by 2030.
“The research suggested that the overall UK mortgage market would expand by over 56 per cent in the next eight years and that of this rise, as many as 500,000 mortgage applications will be dependent on specialist lenders.”
Advantage’s view: The arrival of 50-year mortgages is indicative of the continuing affordability issues facing would-be buyers. Although ultra-long mortgages have been touted by the government as one solution to the housing crisis, many within the construction section and beyond will hope to see more emphasis on supporting housebuilding, helping to tackle the root issue of a shortage of available housing stock. Regardless of the selection of mortgage options available, the underlying demand for more affordable housing remains.