Fifty-year mortgages that you pass on to your children – the new plan to boost home ownership

·3 min read
Boris Johnson has said the Government wants to find ‘creative ways to help people into ownership’ - Leon Neal/WPA Pool/Getty Images
Boris Johnson has said the Government wants to find ‘creative ways to help people into ownership’ - Leon Neal/WPA Pool/Getty Images

Homeowners could take out Japanese-style 50-year mortgages that they are able to pass on to their children under plans being considered by Boris Johnson.

Downing Street is examining proposals to allow first-time buyers to take out “cross-generational” mortgages that would allow them to borrow more money over a longer period.

The loans could then be passed down to children, along with the property, when the original owner retires. Ministers believe that would make it easier for buyers to get onto the housing ladder in more expensive areas of the country.

House price inflation has consistently outstripped wage growth for the last two decades, meaning the average home is now worth nine times more than the average annual salary. In London, the figure is 11 times higher.

A source said the loans could be as long as 40 or 50 years, lowering the annual sum required to pay off the debt. A similar policy has been tried in Japan, where 100-year mortgages were available in the mid-2000s. It has also been tested in Australia.

The Government has already encouraged lenders to issue more 95 per cent mortgages by acting as a guarantor for buyers with five per cent deposits.

Mr Johnson last month announced a new Right to Buy scheme, modelled on Margaret Thatcher’s policy, to help council tenants buy their homes.

Asked about the mortgage idea during a visit to Madrid this week, he told reporters: “I do think there’s a lot more scope to help people with 95 per cent mortgages.

“There are quite a few products available now, which we’ve tried to encourage. But also, we want to find all sorts of creative ways to help people into ownership.

“Last year, we had 400,000 first-time buyers. That’s a great number – we’re starting to turn the tide – but it is crucial for this Government, and for our overall economic story, if those numbers continue to be strong.

“We need young people to have the confidence, to have the deposits, the mortgage packages to be able to get into ownership.”

Asked whether he was considering encouraging mortgages that could be passed to children by their parents, he replied: “Yes, certainly.”

Currently, the most popular length of a mortgage is between 30 and 35 years, according to figures released by the Building Society Association.

Other ideas under consideration include a plan to free up space on public land for housebuilding. Teachers could live in homes constructed on school playing fields under the proposals.

‘Boris is coming at this from the wrong direction’

But the suggestion of cross-generational mortgages was met with scepticism from experts. Scott Taylor-Barr, a financial adviser at Carl Summers Financial Services, said: “I feel that Boris is coming at this from the wrong direction.

“It is not the mortgage market that is preventing people from becoming homeowners – it is the cost of property in relation to people’s earnings. The issue isn’t to find ways to help people take on more debt. We need to find ways to build more houses in the areas people want and need to live.”

Jamie Lennox, Director at Dimora Mortgages, said the policy was “another smoke and mirror idea which will unlikely help the masses”.

“Until more houses can be built quicker to curb the supply and demand issue we have, the percentage of young people getting onto the housing ladder will keep reducing,” he said.

“The proposal of intergenerational mortgages is only going to benefit people with more affluent families that have high incomes or large assets in the first instance. They would likely end up helping their children get onto the housing ladder in other ways.”