An unfortunate combination of economic conditions over the last few years in the UK have seen a rapid increase in the number of peoplem applying for mortgages with 35 year terms...
According to EuroNews 23% of first-time buyers now take out these longer term mortgages.... this is up from 17% in December 2021.
The two main drivers of this are increasing house prices and higher interest rates, the combination of which means the cost of buying a house is astronomical and now literally a life-long process, or at leat a working-life long progress.
But longer in some cases as more people are taking their mortgages into retirement, given that the average age of a first time buyer is now 32. I mean people still need time to live a little and save for a deposit, maybe less of the former these days if you want to become a home owner.
Or 'owner' as you don't really own your own home with a mortgage!
You can see why people do it, if you take out a £200K mortgage at 5% interest then your repayments will be £1170 over 25 years but only just over £1000 over 35 years, and when times are tight, like they are, that extra £150 a month can make al the difference.
The problem with the two models, is that adding on 10 years to the term costs you £70K more overall!
Inflation the root cause it seems..
High inflation is behind the relatively recent increase in longer term mortgages, or at least the standard response to high inflation which is to increase interest rates...
And although inflation is now back to sensible levels, interest rates don't seem to be following, and they won't be following for a few years in the cases of some people with new mortgages, many will be stuck at 5% for 5 years with fixed rate deals even if interest rates come down to 2-3%.
(I personally fixed at just over 5% a year ago, but with a small mortgage this matters little!)
Stubbornly high house prices
What I don't really get is why house prices are remaining so high....? I guess it's just lack of supply, everyone needs somewhere to live, after all, and we all know both population and demand for more space per person per house is increasing too!
Final thoughts
It's not a great place to be in, being a potential house buyer ATM. Hopefully Labour can do something about this by getting more houses built, and keeping inflation under control.
It's not much of a life when your most basic need, housing, cripples you financially!
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A home is a basic necessity and ought to be affordable. I'm sure there are lots of factors in this. It seems the rich often invest in property, so they will reduce what is available to buy. Let's see what the government do about that. They may worry about upsetting the rich, but they are a minority of voters. Yes, I know those who already own something will hate to see the value go down, but it's unsustainable.
I think the easiest way is just to build more houses... the market will sort out the rest!
Supply isn't the problem as there are over 600,000 empty properties in the UK (last time I checked)
The problem is with the current distribution system. Absent owners, deceased owners with no will or beneficiary listed and of course the blood sucking developers land banking plots of land up and down the country and to a lesser degree investment property bought by foreign investors.
There is no shortage of housing just a broken system that allowed things to get this bad
Well yes I absolutely agree, I wasn't being that critical here, I just took 'legal supply' - I agree 100% the system is totally broken!
Distribution is it basically. On top of that so many older people living in massive houses they don't need, but they'd cite the emotional ties as being important to them!
It depends on where those houses are as prices vary massively. A 2 bed terrace may cost £60k in a deprived area or £300k where people are wanting to live. Those who could work totally remotely ought to be opting for the former, but most people need to get to some place of work.
I've seen prices go up a lot around here since we built our house 20 years ago. My kids will struggle to buy something.
I remember not to long ago seeing whole streets of houses being offered for £150 per house admittedly they were in terrible condition and mostly up north but what struck me was that the local council were not allowed to buy them?
That my friend is/was government policy.
Those housing laws must be repealed asap so that councils can get back into building homes for their constituents. As used to be the norm.
Not everyone wants to buy a home. Not everyone can afford a good house.
Home ownership is a relatively new concept.
The 'housing ladder' was a marketing ploy cooked up by the Tories and their builder buddies to sucker people into lifetime debt.
If you have a mortgage (literally death debt) you are unlikely to go on strike or demand better working conditions.
It is messed up. With so many people having an investment in property it's controversial to mess with it. I'm hoping Labour will be bold.
I'm lucky to be mortgage free.
Fortunately there are many people who are also mortgage free so it really doesn't matter if the housing market crumbles.
It's collapse is long overdue and has been artificially propped up for way to many years.
I used to study the housing market quite a bit but the constant Tory government interference in the market made it impossible to correctly gauge.
Labour needs to build millions of houses and fast. Not the paltry 1.5 million suggested.
That would bring the markets back into equilibrium. Some people will lose equity in their properties but it's for the greater good.
At the moment virtually no one can afford a home and that is not only scandalous it's against basic human rights.
Do we have the building industry that can and will build that many homes? We need those council houses back.
We have to wait and see. After and before Brexit many European workers left the UK as they feared the government would fling them out.
Are you going to Hivefest?
Hi, probs not this year, money's a bit tight, and work/ life commitments make it a bit of a tough one too!
Have you voted that SL proposal btw... needs all the help it can get, and are you in Portugal still..?
still in Portugal, yes! And voted proposal ofc, even powered up 80K ;-)
True.. basic needs must be accessible. 😊
The housing bubble has got to burst at some point, it simply cannot keep on going up as it is. We are lucky with out mortgage rate but funnily enough our monthly outgoing are very close to your £1170. We will be free of it by the time I’m 62 I think, so another ten years. I must check as I’m now thinking that it might be less.
We had to borrow more two years ago as we wanted more space, hence a bigger house in a village. It cost us a bit. Were a bit pinched for awhile. Still a bit tight on some things that used to be so so much cheaper.
We need more places for people to live. I think some buildings could be adapted for accommodation where fit for purpose, besides building new all of the time.