Are 50-Year Cross-Generation Mortgages On The Cards?

by | Monday 4th Jul 2022 | Mortgage News

Cross-generation mortgages on the cards for UK borrowers?

Struggling to get enough mortgage borrowing because of your age? 35-year mortgage term still too expensive per month for your budget? Would you consider taking 50-year cross-generation mortgages if it meant that you could get the perfect house? All it would mean is that your mortgage would pass to your children when you passed away!

In a recent sky news article, they announced that the government would be considering introducing 50-year cross-generation mortgages. This is to help people struggling to get a mortgage over standard mortgage repayment periods. The cross-generation mortgages would essentially be offered to people who, in high-likelihood, would not be able to pay their mortgage for the entirety of the mortgage. Their children could then continue the mortgage in their own name until the loan is paid off.

Why Are The Government Proposing 50-Year Cross-Generation Mortgages?

This mortgage type is similar to the Japanese mortgage lending style. Japan has a low birth rate and a growing elderly population, so they are finding that older people benefit more from taking longer mortgages. Their families would then take on the loan after they die. If the UK did adopt this mortgage lending style, a 34-year-old first-time buyer (average age of a first-time buyer in the UK) could get a mortgage up until the age of 84. If they pass away before then, the loan could be transferred into their children’s name to finish off the term for them.

Prime Minister Boris Johnson has said that he is looking to “unlock the opportunity of home ownership”. He has said that he is definitely considering cross-generation mortgages as a means to accomplish this. The idea is thought to have been a result of the low net-mortgage borrowing figures announced by the Bank of England in April 2022 of £4.2 billion. However, as we have explored in our latest article, net borrowing has increased by 76% in June 2022 so perhaps this drastic measure will be shelved for the time being.

Are 50-Year Cross-Generation Mortgages A Good Idea?

Obviously, there would be lots of things to consider before this could come any where close to being accepted by the government and mortgage lenders, and there are plenty of pros and cons. Yes, a longer mortgage term could allow a buyer to borrow more and therefore purchase an otherwise too expensive property. Their mortgage repayments would go down drastically making it much more manageable for them. However, 50 years is a long time, and no one can predict where they will be financially 50 years in the future.

The borrower’s children could be unprepared financially to take on a mortgage and if their parent(s) passed away unexpectedly, a 50-year mortgage would be a very unwelcome surprise! But what if you get a mortgage for 50 years and you do live to near the end of the mortgage term? Most people would prefer to have a shorter mortgage term that is paid off sooner so that you can enjoy your retirement years debt free. Having a regular mortgage payment when you are in your 80s and 90s is not ideal. In some cases, Japanese lenders have issued 100-year mortgages. Imagine that!

Will 50-Year Cross-Generation Mortgages Help The Housing Crisis?

Although no rules have been outlined and it is still very much an idea that hasn’t even started walking yet, there must be some clause that allows you to sell the property if your parent dies. And, even if cross-generation mortgages address mortgage affordability, they don’t address the housing shortage at all as longer mortgage terms are bound to encourage people to stay in their homes longer, but we will have to wait and see what comes from it.

If you or anyone else you know would like to learn more about your mortgage borrowing capacity or have any other mortgage related questions, please feel free to give our team a call today.

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