A homebuyer opting for one of the government’s proposed 50-year mortgages could end up paying over £470,000 in interest alone for an average priced property, new analysis has indicated.
Research by estate and lettings agent, Barrows and Forrester, showed that this would end up being double the figure that was initially borrowed.
At the beginning of July, the government hinted at plans to introduce “ultra-long” mortgages of up to 50 years that could pass between generations, allowing more people to build up equity rather than pay rent.
However, Barrows and Forrester suggested that these plans would “play on the desperation” of those looking to own their own home.
Analysis by the estate agent worked on the basis of a 75% LTV loan, and said the average UK homebuyer currently needs to borrow £210,872 once a 25% deposit worth £70,290 has been placed. With an average fixed rate of 6.19%, this would require a monthly repayment of £1,140, £1,088 of which would be interest paid on the loan.
Over a 50-year term, this would means a homebuyer opting for a 50-year government mortgage would pay a total of £472,984 in interest alone – over double what they initially borrowed. This could climb to £683,855 when considering the total cost of the loan and when factoring in the 25% deposit, it would place the cost of homeownership at £754,145 – almost three times the original value of the property.
Barrows and Forrester managing director, James Forrester, commented: “There’s certainly nothing creative about the government’s manipulation of the housing market. Their failure to build more homes while consistently introducing schemes to boost buyer demand has caused house prices to climb to record highs.
“Now they’re considering snaring buyers into 50-year mortgage terms, a move that plays on the desperation of many to own their own home, who simply can’t contend with the high price of buying in today’s market.
“In doing so, these buyers would essentially be stuck renting from the bank well into their golden years, paying exuberant levels of interest for the pleasure of doing so.”
The UK housing market in 2024
The performance of the UK housing market in 2024 has largely exceeded many people's expectations, although challenges remain for first-time buyers due to house prices increasing and a testing rental market for many. Regional disparities, such as the North-South divide, also continue to influence housing accessibility and affordability for many buyers in pockets of the country.
Intergenerational lending
MoneyAge News Editor, Michael Griffiths, hosts Family Building Society BDMs, Amar Mashru and Arif Kara, to discuss intergenerational lending and explore ways that buyers can use family income to help increase their borrowing capacity when applying for a mortgage
Helping landlords make their cash work harder
MoneyAge Editor, Adam Cadle, talks to Family Building Society BDMs, Arif Kara and Nathan Waller, about the resilient BTL market, the wide variety of landlords that Family Building Society caters for, and how niche products like an Offset mortgage can help improve cashflow.
© 2019 Perspective Publishing Privacy & Cookies
Recent Stories