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Saturday, Feb 22, 2025

No 10 considers 50-year mortgages that could pass down generations

No 10 considers 50-year mortgages that could pass down generations

Cautious welcome for idea to tackle housing crisis but experts warn of risks to those inheriting

Downing Street is 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.

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.

Under the plan being examined by No 10, a longer mortgage period would allow people to borrow larger sums, with the possibility of passing the debt on, although it remains unclear what government action would make this happen.

Other housing ideas being considered by Downing Street include trying to free up government-owned land for rapid homebuilding, and exploring whether institutions such as schools could build homes for key workers priced out of local areas.

Boris Johnson, speaking to reporters during his trip to the Nato summit in Madrid this week, confirmed that the idea of 50-year mortgages was being looked at, saying the government “wants to find all sorts of creative ways to help people into ownership”.

He said: “Last year we had 400,000 first-time buyers. That’s a great number, we’re starting to turn the tide, but it is crucial for this government and for our overall economic story if those numbers continue to be strong.

“We need young people to have the confidence, to have the deposits, the mortgage packages to be able to get into ownership. If you’re good enough to pay a lot in rent, we should find ways to help you to convert that into a mortgage.”

Asked if he was considering ultra-long mortgages, he replied: “Yes, certainly.”

The idea of multi-decade mortgages being transferred between generations is not new and has been pioneered in Japan, where 100-year family mortgages have been offered for some time.

In the UK, relatively long mortgages are already the most common. According to the Building Societies Association, 37% of first-time buyers took out mortgages of between 30 and 35 years, with only 10% opting for less than 20 years.

The key challenge is the decades-long acceleration of home prices beyond growth in pay. In England, people in full-time work now need to spend an average of 9.1 times their annual earnings to buy a home.

Longer-term mortgages would mean people could borrow greater sums with the same monthly mortgage repayment, potentially opening up many more homes to those currently unable to buy, who might end up spending less money on repayments than they do currently on rent.

What these mortgages would not do, however, is solve the long-term shortfall in housebuilding.

Graham Taylor, the managing director of the mortgage firm Hudson Rose, said the idea had complexities. “On the face of it, it seems like a great idea,” he said. “But the problem remains that the loan would need to be affordable for all the original applicants and also the children who inherit it. Otherwise, the children could risk inheriting a liability they are unable to manage, which, when secured against your home, has catastrophic consequences.”

Other potential complications include that when a property is passed on to children, inheritance tax could be liable, and the prospect of people having to maintain payments into retirement.

Rob Gill, the managing director of Altura Mortgage Finance, said that if the plan did open up the market to more first-time buyers, this would have the effect of keeping property prices artificially high. “It seems governments the world over will do anything to avoid the alternative of property prices actually falling,” he said.

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