Tuesday, Dec 05, 2006

Renting from the bank becoming more popular...

aboutproperty.co.uk: First-time buyers favour lifetime mortgages

First-time buyers are so keen to get onto the property ladder almost half would take on a 50-year mortgage rather than take a loan from their family or buy with a friend.

This means first-time buyers, who are on average aged around 30, would still not own their home until they hit their 80s.

Posted by little professor @ 04:29 PM (423 views)
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10 Comments

1. paul said...

I have serious doubts about that quoted average age of the first time buyer. Just before the last crash the average age went up to 33, and in recent years it's been steadily rising. Even the BBC reckons it to be around 34 at the moment, and that may be a conservative estimate.

More current data is difficult to come by, particularly because the principal lenders recently appear to be (mysteriously) less willing to share it.

Tuesday, December 5, 2006 06:30PM Report Comment
 

2. Nohpc said...

This is completely illogical. You do not take out a 50 year mortgage because you intend on paying your mortgage off over 50 years. You do it to keep your initial monthly repayments low. It is very unlikely that in 10 or 20 years time you will not be able to start paying your mortgage off at a much speedier rate. Even if you do keep on paying it over 50 years the payments are likely to be tiny in comparison to what they were 50 years ago. Personally I think you are better off with an interest only mortgage and paying any excess money you have into the repayment. That way you can be flexible.

Tuesday, December 5, 2006 07:26PM Report Comment
 

3. nearly30 said...

Yes paul you may have a point - that's the trouble with averages.

For Scotland it is 37:

http://news.scotsman.com/scotland.cfm?id=1707942006

Yet council of mortgage lenders would love us to believe it's closer to 29!!

Yet HBOS own figures for 2004 has average at 34-35. I doubt FTB age has dropped since then CML???

http://www.hbosplc.com/economy/includes/06.03.04%20-%20First%20Time%20Buyer%20Review%202004_Scotland.doc

As for affordability - it's way of the scale - 5.9x for London in 2004 - God knows what it is now!!

Factoid: "Legal issues for lenders" CML Conference Event 10 Jan 2007 - will make for interesting reports.

Tuesday, December 5, 2006 08:47PM Report Comment
 

4. inbreda said...

NoHPC - the only way that "payments are likely to be tiny in comparison to what they were 50 years ago" is if inflation wears away the value of debt.

If the BoE fight inflation (necessarily) by raising interest rates, the last hing I would want is a mortgage of more than 3 times my salary. You really think that some FTB with a 50 year mortgage is going to be able to keep up repayments with high interest rates when the value of their 'investment' in real terms is falling?

I'd love to know how.

Bear in mind that if we are all earning much more in the future compared to what we earn now, it will be so much easier to buy a house in the future - there is still no logic in buying at historically high (by any measurement) prices.

Tuesday, December 5, 2006 11:18PM Report Comment
 

5. Ticktock said...

NHPC,

You seem to assume that future will always be exactly the same as the past, and that what has been true in decades past, will also be true for the future. Nobody would argue that a fifty year mortgage taken out fifty years ago wouldn't have worked well in the way you suggest, but as with all investments 'the past is not always a reliable indicator of future performance'

But hay, If you are comfortable paying 1000 per brick then good luck to you I say. I wish you, your bricks, and your debt all the best during the challenging times that await us all.




Tuesday, December 5, 2006 11:47PM Report Comment
 

6. This comment has been removed as it was found to be in breach of our Blog Policies.

 

7. Nohpc said...

You are assuming that house prices will be less compared to earnings in the future. There is no guarantee of this inbreda. A first time buyer buying now should be able to shoulder a few interest rate rises. Any more rises than this looks very unlikely. It still makes sense to buy now if you are looking for a home for the next 10 years or longer. House prices look set to rise further yet next year. If there is no fall property will rise even further out of reach. I believe it is a bigger gamble to wait for the market to fall than to get into it now.

Wednesday, December 6, 2006 05:14AM Report Comment
 

8. Nohpc said...

And don't forget the bank also fights deflation as well as inflation so we should have at least 100% inflation over the next 50 years.

Wednesday, December 6, 2006 05:15AM Report Comment
 

9. waitingfor hpc said...

also what happens if you max out on buying a 1 bed house. Even in 50 years time wages up with earnings how the hell you going to trade up? Unless you have had promotion - which not everybody will get. If house prices keep going up then the gap between your next house on the ladder goes up as well.
What if the FTB is a couple maxed out and want a family - which will interupt this great financial plan?

Wednesday, December 6, 2006 09:25AM Report Comment
 

10. Retiredbanker said...

I see that a member of the MPC recently said that UK wages are still too high.

This would fit it with the aims of globalisation favoured by our rulers, and it seems to me that ordinary people expecting their wages
to improve in real terms in the future are going to be disappointed.

You have only to look at America to see this is happening already to both the working and lower middle classes, hence the large
equity withdrawals against properties to try and maintain living standards despite declining incomes.

Wednesday, December 6, 2006 11:42AM Report Comment
 

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