25th
Aug 2022
A high profile property industry leader has slated the government’s intention to persuade/encourage more and more mortgage lenders to offer 50 year mortgages to help first time buyers get onto the housing ladder.
David Alexander wants the government to turn their attentions to encouraging further investment into the private rented sector, focus on social housing and introduce far easier planning laws which he believes will help ease the housing shortage.
He says Boris Johnson’s ‘weight’ behind the call for more 50 year mortgage terms to be offered and although it will help first time buyers there could be a considerable downside that it could be just delaying a downturn in the market.
Rather than solving the issues for borrowers it may just escalate problems.
He sends out the stark warning that if the policy is fully actioned then it will undoubtedly spark a short term boom in the housing market followed by a long term bust.
He says: “With people stuck on 50-year mortgages they are unlikely to be able to afford to move as it will take decades for equity to accrue, debt will remain very high for years resulting in the bulk of repayments being made against interest, and there will be little opportunity or ability to move home despite the likelihood of changed circumstances.
“While it may suit a young couple who borrow on this basis in their twenties this could become a burden when they start a family and need to borrow more to buy a larger home After a decade, they will have paid off very little and any accrual in value will be matched in the property market they live in limiting their options to change home.”
He adds: “What the housing market does not need are longer mortgages, less stringent affordability criteria, or higher borrowing multiples. If the government really wants to stabilise or reduce prices, then they need to increase supply. Demand has been outstripping supply for years in both social housing and the private sector and unless this is resolved there will continue to be housing shortages and rising prices.”
He concludes: “The solution to the problem is to encourage more homebuilding through an easing of the planning system; seriously increase the volume of social house being built; and encouraging investment in the private rented sector to continue to meet the demands of people not currently buying and not eligible for social housing. A 50-year mortgage is simply temporarily sustaining the market and passing debt on to the next generation which does nothing to resolve the long-term underlying issues in the housing sector.”
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