Proposals for extra-long term mortgages explained

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Critics have said the proposal fails to address the issue of the cost of real estate relative to people’s incomes

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What are Extra Term Mortgages?

The idea of ​​extra-long-term mortgages could result in people buying a home without expecting to make the mortgage payments during their lifetime, instead passing the property and outstanding debt on to their children.

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The most popular mortgage term among first-time buyers is around 30 to 35 years, but an intergenerational approach could add decades to that.

The proposal could see mortgages passed from parent to child (Photo by Christopher Furlong/Getty Images)

100-year mortgages were issued in Japan, but experts were skeptical about the proposal’s impact in the UK.

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The idea was floated within government as it could allow people to buy a bigger home than they could otherwise afford.

The government is already trying to boost home ownership with a package of measures including extending the right to buy to housing association tenants and trying to improve access to 95% mortgage rates for buyers who are struggling because of the high rent levels for a larger security deposit to save.

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What did Boris Johnson say about extra-term mortgages?

When asked if he was considering intergenerational mortgages that could be passed between parents and children, Prime Minister Boris Johnson told reporters: “Yes, certainly.”

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Explaining his plans to get more people up the property ladder, the Prime Minister said: “I think there are a lot more ways to help people with 95 per cent mortgages, there’s a whole range of products now that we’ve tried to encourage .

Prime Minister Boris Johnson said he was “certainly considering” the idea (Photo by Carl Court/Getty Images)

“But we also want to find all sorts of creative ways to help people become owners.

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“Last year we actually had 400,000 first-time buyers, that’s a big number, we’re starting to turn the tide, but it’s critical for this government and for our entire economic story if these numbers continue to be strong.

“We need young people who have the confidence, who have the deposits, who have the mortgage packages, to be able to buy property.”

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What did critics say?

Commentators have warned that extra-long-term mortgages would not solve housing supply problems and could push house prices further higher.

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Scott Taylor-Barr, financial advisor at Carl Summers Financial Services, said: “I have a feeling Boris is coming from the wrong direction.

“It’s not the mortgage market that’s keeping people from becoming homeowners; it is the cost of property relative to people’s income.

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“The problem isn’t finding ways to help people take on more debt, we need to find ways to build more homes in the areas where people want and need to live.”

Property and rental agents signs on a residential street in Hackney, east London (Photo by DANIEL LEAL/AFP via Getty Images)

Rob Gill, Managing Director at Altura Mortgage Finance, said: “We’re going Japanese. A decade of extremely low interest rates followed by intergenerational mortgages, which have been a feature of the Japanese mortgage market since the mid-1990s.

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“Low interest rates drive house prices up, then long mortgage terms keep them going because it’s the only way for first-time buyers to climb the ladder.

“It seems that governments around the world will do everything they can to avoid the alternative of real estate prices falling.”

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Additional reporting by PA

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