Telegraph: Britons face a lifetime of debt as BoE warns over 35 year mortgages

[ARENAPUA]

http://www.telegraph.co.uk/business/2017/07/15/britons-face-lifetime-debt-bank-england-warns-35-year-mortgages/

What I don't understand, which totally underlines to me the fact the BoE aren't really serious about tackling the problem and want to prop up house prices, is if they are truly concerned, they would legally restrict the maximum length of borrowing to 25 years.

Just empty rhetoric back up by inaction...

 

[Ballyk]

Those charts are seriously alarming, I had no idea it was this bad.  Clear proof that Carney has been asleep at the wheel.

Mortgages of more than 30 years - 

2006 - 12%

2017 - 35%

I'd always assumed that 25 year mortgages were the norm, and that 30 or 35 year mortgages were very much the exception.  The current situation is crazy.  Extend and pretend, that is the BOE's approach, nobody is sorting out our problems.  Lower the cost of debt, extend the term of debt, government 'help' to take on more debt.  It is all a ticking time bomb.

[nome]

10 hours ago, ARENAPUA said:

Just MORE empty rhetoric back up by inaction...

 

This really should be the BoE's official title.

[goldbug9999]

Hes just being vigilant.

[DarkHorseWaits-NoMore]

Worse still, I suspect many are borrowing to the max later into their 40s for 30+ years, then with each move taking them back to max 4.5x multiples, eventually clipped down by max lending term limits (up into your 70s now?). Which is a much deeper lifetime debt position, compared to the old 3x multiple for a standard 25yr term, taken on at ~25yrs old and expected to be paid off by arround 50 years old.

[durhamborn]

4 minutes ago, DarkHorseWaits-NoMore said:

Worse still, I suspect many are borrowing to the max later into their 40s for 30+ years, then with each move taking them back to max 4.5x multiples, eventually clipped down by max lending term limits (up into your 70s now?). Which is a much deeper lifetime debt position, compared to the old 3x multiple for a standard 25yr term, taken on at ~25yrs old and expected to be paid off by arround 50 years old.

Yes i think that is the key point.People are pushing out the terms when doing a re-mortgage in their 40s.It has to be this because if not you couldnt explain over a third of mortgages being more than 30 years.Massive risk.Lose your job in your mid 50s at least the mortgage is paid off and you can earn a lot less.Not now.Crazy position to be in.

The government and bankers main concern is stopping people passing wealth on.This is a very good way to do it.

[BorrowToLeech]

Back in 2006 it was possible to get interest only mortgages, an interest only mortgage is an infinity-year mortgage. 

Essentially, this is a creeping return to reckless IO lending. 

[stuckmojo]

Crazy as most of these borrowers' income is at peak and if they havre children their disposable income will in fact fall

[Lord D'arcy Pew]

There's a reason people take out 35 year mortgages, it's because no one will give them a 45 year mortgage.

You can not save people from themselves, we should let them take responsibility and not bail them out.

Edited July 16, 2017 by Lord D'arcy Pew

[Lord D'arcy Pew]

Quote

Several lenders including Halifax, the UK’s biggest mortgage provider, and Nationwide have raised their borrowing age limits to 80 and 85 over the past year.

This will be to support all the interest only mortgage holders when they fail to stump up the balance. Mortgages for the financially illiterate. Sub-prime MK2.    

Edited July 16, 2017 by Lord D'arcy Pew

[Parkwell]

Remember. Get the biggest mortgage you can. Really stretch yourself. Then just keep up with the payments. It'll work out in the long term.

Like fleecing sheep.

[flb]

It doesn't matter. Due to currency devaluation, it might as well be 350 years.

Simple exercise: look for someone who got a 25 years mortgage 20 years ago. Check what their monthly payments amount to now. Or ask your (grand)parents what their salary was 25 years ago.

 

You'll get it.

[thisisthisitmaybe]

42 minutes ago, satch said:

Carney will be long gone when the problem starts having an effect ... it was all fine when he was there! Nothing to do with Carney must be the new person caused the problem. Like Browns tax credits ... all these policies are great at the start and only have dire consequences some 10 years later when the instigator is long gone,

Although I'm no fan of Carnage Carney, the can had been kicked down the road many times before his appointment. Remember "steady Eddie" George? He was responsible for reducing rates in response to the dot-com crash, and said he expected his successor to sort it out. 

The issue is central bank interference in the regular boom-bust cycle that is the hallmark of capitalism (as well as a huge amount of crony collusion between the central banks and the wider financial system).

Until people rise up against central banks, nothing is going to change. Labour would do well to start attacking the B of E in parliament, it could be an election winner long term.

[frederico]

22 minutes ago, flb said:

It doesn't matter. Due to currency devaluation, it might as well be 350 years.

Simple exercise: look for someone who got a 25 years mortgage 20 years ago. Check what their monthly payments amount to now. Or ask your (grand)parents what their salary was 25 years ago.

 

You'll get it.

Not sure what you're saying here, but have a look at interest rates over the last say 30 years. 

Then consider how much someone should be paying into a pension.

[spyguy]

Empty stable meet open door.

[spyguy]

52 minutes ago, Lord D'arcy Pew said:

There's a reason people take out 35 year mortgages, it's because no one will give them a 45 year mortgage.

You can not save people from themselves, we should let them take responsibility and not bail them out.

Now but banks shoukd have a responbility, consumer loans and all that.

A quick run up with a spreadsheet shows mortgages over 25 are anything but cheap.

[“Nasty Piece of work”]

13 hours ago, ARENAPUA said:

Just empty rhetoric back up by inaction...

That, and printing, is all the BoE can do, and remain vigilant.

 

 

[spyguy]

4 minutes ago, Mine the wheatfield said:

That, and printing, is all the BoE can do, and remain vigilant.

 

 

As Butyonwood said - QE does not create wealth, just cuts the cake into more slices.

He also said the biggest problem with QE is getting out of it.

[flb]

56 minutes ago, frederico said:

Not sure what you're saying here, but have a look at interest rates over the last say 30 years. 

Then consider how much someone should be paying into a pension.

What I'm saying is that in 20 years, your monthly payments (mortgage) will probably mean 5% of what it would cost you to rent.

[maverick73]

People stretch their mortgage agreements to max affordablility. The BoE gains more through a longer cycle of debt borrowing. With regards to job security, that died 30 years ago... it doesn't exist. All I see is crazy people spending more and more on the assumption that it makes them rich... it's a fools parody ?

[Talking Monkey]

1 hour ago, flb said:

What I'm saying is that in 20 years, your monthly payments (mortgage) will probably mean 5% of what it would cost you to rent.

I wouldn't look at the past 20 years and use that to project forward, we're into uncharted territory now I think. Globalisation means wage inflation is really difficult, job security is virtually non existent, and tech will take out more and more jobs as it develops.

[flb]

8 minutes ago, Talking Monkey said:

I wouldn't look at the past 20 years and use that to project forward, we're into uncharted territory now I think. Globalisation means wage inflation is really difficult, job security is virtually non existent, and tech will take out more and more jobs as it develops.

Look at the past 300 years then.

[wish I could afford one]

The banks must love this.  Some quick maths assuming a £200k mortgage and 5% IR's.  Going from 25 to 35 years adds 40% to the repayment time but it only reduces annual payments by about 14%.

No thanks, I'll pay cash.

[anonlymouse]

To play devils advocate, if you're a savvy investor extending the term of the mortgage and investing the difference in mortgage costs is a far better decision than taking as short a mortgage period as possible.;

£200k House / £150k Mortgage, 25 Year Term, 4% Interest. Monthly Payments = £792. Total payable: £237,527 (interest = £87,527), assets £200,000.Net = £112,473
£200k house / £150k Mortgage, 35 Year Term, 4% Interest. Monthly Payments = £664. Total payable: £278,948 (interest = £128,948) assets £200,000 Net = £71,052

If you invest the difference between payments (£128) in stocks and shares (average return 7%) your investments will return you £231,879 over a 35 year period.
For true comparison, say in the first example the person then switches their mortgage outgoings (£792) into investments for ten years. This would return £137,882

Net result for 25 year mortgage followed by 10 year investment (£112,473 + £137,882) = £250,355
Net result for 35 year mortgage alongside 35 year investment (£71052 + £231,879) = £302,931

 

Of course, if you're not disciplined enough to save the difference and do instead use it to stretch affordability then it's all moot.

 

[DarkHorseWaits-NoMore]

Another factor I'm seeing coming into play. Choose to either save hard all remaining disposable income to pay down the mortgage quickly, at the expense of having a good time with your kids as they grow up. It's all very well paying off the mortgage quicker but can you really put a price on having a life with your wife n kids at a critcal often unrepeatable phase, I guess it depends what you value more. Especially when people often have to start a family later in life due to this insane career and financial situation forced on the many.