50-year mortgage you pass on to the children
FAMILIES could be offered mortgages of 50 years or more that can be passed between generations under plans being considered by Boris Johnson.
Lenders will be encouraged to let buyers borrow over terms lasting five decades or even longer so they can move into bigger homes.
Under the proposal, people would not be expected to finish paying off their mortgages during their lifetimes. Instead, they would be able to hand over their properties to their children – including the outstanding debt.
Ministers believe the plan will give people the chance of moving into their dream home as they will be able to take out larger loans.
Inheritance tax is only levied on the net value of the property so if it is mortgaged when the owner dies, the inheritance tax bill will be lower.
Mr Johnson last night pledged to ‘find all sorts of creative ways to help people into ownership’.
Other ideas under consideration include freeing up more stateowned land so it can be used for housing, as well as providing accommodation for key workers close to where they work.
It comes after the Prime Minister last month vowed to turn ‘Generation Rent’ into ‘Generation Buy’ by launching an independent review of Britain’s mortgage market with the aim of increasing the availability of 95 per cent loans.
He added: ‘Last year, actually, 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 if he was considering cross-generation mortgages that could be passed between parents and children, the Prime Minister replied: ‘Yes, certainly.’
The length of mortgage terms has increased as house prices have gone up. The maximum term currently on the market in the UK is 40 years. Perenna, a new lender, has said it intends to roll out 50year mortgages in the future.
A longer mortgage term means lower monthly repayments but increases the total cost. According to the Building Society Association, over the past year the most popular mortgage length among first-time buyers was 30 to 35 years.
Government officials believe cross- generational mortgages would allow families to buy bigger homes, which their children can inherit with some of the mortgage outstanding, rather than smaller homes on which the loans have been paid off.
Graham Taylor, of mortgage broker Hudson Rose, said last night: ‘On the face of it, this seems like a great idea, but the problem remains that the loan would need to be affordable for all the original applicants and also the children who inherit it.
‘Otherwise, the children could risk inheriting a liability they are unable to manage which, when secured against your home, has catastrophic consequences.’
‘Risk of inheriting a liability’