Prime Minister, Boris Johnston, has suggested the Government is exploring the introduction of 50-year mortgage terms to make monthly mortgage payments more affordable to allow younger generations gain access to the property market.
In an interview, whilst attending the NATO conference in Madrid over the weekend, Johnson said the government was in consultation with interested parties of making 50-year mortgages widely available. The idea being you can secure a mortgage but it to be affordable and if the mortgage is still outstanding when you die, your beneficiaries can take over property ownership and the mortgage.
Longer term mortgages are commonly available overseas. In Switzerland, a scheme exists where you part own the property and the other part is an open-ended low interest rate or up to a 50-year term mortgage with the Swiss government offering tax relief, so many people never pay the whole of their mortgage off to retain the tax breaks. In Japan, it is common to have a 100-year mortgage. The UK, as many of us know, mortgage terms are usually up to 25 years, now more commonly 30 years and in rare circumstances up to 40 years.
This is all smoke and mirrors. With petrol at £2 a litre and the government taking 96p of that in tax, ask yourself why they have not reduced taxes to ease consumer cost of living. The simple answer is they want the tax revenue, but they also want inflation to remain. The same with 50-year mortgages. There is no encouragement to reduce property prices by making 50-year mortgages available. Property prices can remain high and be pushed even higher if you can afford more due to a longer term, lower payments mortgage. Higher property prices mean bigger inheritance tax, stamp duty and capital gains tax revenues. High inflation is maintained.
Why doe the government need higher inflation for a sustained period? To devalue £500bn of covid-19 government debt.
50-year mortgages may be good for some people, but we suggest most people should not make use of them, or if you do, try and make regular overpayments when you can to pay off your debt earlier.