One Mortgage For A Lifetime? Helpful For Buyers?

In recent years, longer-term mortgages have come quite commonplace. 30-year mortgages are now a standard product, and many buyers are taking advantage of this style of mortgage. Having more time to pay off a mortgage helps a buyer find a more affordable mortgage, as the monthly payments are lower. Of course, the overall amount paid off is higher due to the more extended time frame. Still, when it comes to making a monthly mortgage payment, a more extended period is of benefit for many home buyers.

However, plans are in place to introduce a lifetime mortgage with an interest rate which stays the same for the entire mortgage. This may make a 25-year mortgage more attractive to some property buyers because it removes some of the uncertainty involved with mortgage payments. With a variable mortgage, there is a hope that interest rates will fall, and the homeowner can save money each month. Of course, the reality of the situation is interest rates fluctuate, and it would be unwise to assume changes will be positive for a homeowner.

Many home owners are happy to be risk averse

With this backdrop, it is easy to see why many people hedge their bets and opt for a longer, yet more affordable mortgage. You don’t have to be risk-averse to seek out this style of a mortgage; the importance of home ownership is such that many people will make a cautious decision when it comes to arranging a mortgage.

Prime Minister Boris Johnson has pledged to introduce mortgages which can be arranged with a deposit of just 5%. The home buyer would then sign up for a lifetime mortgage, of 25 or 30 years, and the rate wouldn’t change over the lifetime of the mortgage. The Center for Policy Studies (CPS) think tank has backed this proposal.

Many home buyers are looking for support

There is no denying there is a home ownership crisis in the United Kingdom. There is a need to provide solutions which assist people in stepping on to the property ladder, and the CPS has issued a report on this matter.

In the conclusions, the author of the report states long-term fixed-rate mortgages are an easy solution. Graham Edwards says; “Owning your own home is a near universal aspiration in the UK, yet owner occupation has been declining in recent years. I think we have an obligation to try to help the younger generation get on the property ladder. I hope that my proposals will help many people do just that.”

The report argues 5% is an affordable deposit in reach of many first-time buyers. The report also claims the fixed nature of the mortgage provides confidence for home buyers, and it dispels some of the fears and concerns buyers, and lenders, have about arranging a mortgage.

While buyers think tanks and the Government will see the positive side of this style of mortgage, will mortgage lenders? Lenders need to make commercial decisions. There is an argument that says bringing in more clients and receiving more money over a longer time frame is enough incentive for lenders to comply. Still, if it was so appealing for lenders, this style of mortgage would already be available.

However, there is optimism additional support is being made available for home buyers, and more mortgage offers may be made available. Anyone looking to arrange a mortgage in 2020 would be advised to stay in touch with the latest developments.

If you’d like to get in touch with us to discuss all your possible options, we’re always here to help. With mortgage brokers in Woking and Camberley, you are never too far from mortgage advice.

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