The government is considering the possible introduction of Japanese-style 50-year mortgages that can be passed on from parents to their children, designed as a means of helping successive generations onto the property ladder.
Under this kind of deal, the cost of repayments would be spread over much longer to keep the expense down, which would allow not only the initial buyer a more affordable repayment that would allow them to become property owners, but also the chance to pass the same home on to their children when they die.
This would, of course, mean their children taking on the debt, which might occur even if the next generation come into the situation with poor credit records.
Speaking during a visit to Madrid, Prime Minister Boris Johnson said, “We want to find all sorts of creative ways to help people into ownership.”
He added that there were over 400,000 first-time buyer purchases last year, which he labelled, ‘a great number’, but added, “It is crucial for this government and for our overall economic story if those numbers continue to be strong”.
As with any proposal that the government might consider, the devil is often in the detail, not least the question of whether a mortgage broker for bad credit could offer such a product. Whether or not this possibility will arise, it makes sense for those seeking a mortgage despite having a poor credit history to speak to the experts.
In Japan, such deals have been known to last as long as 100 years, but these have been issued in an economic climate where inflation has been close to zero – and the economy has often seen deflation – in recent decades. In line with this, extremely low interest rates have also been the norm, even going into negative territory.
The UK and other western countries might have appeared to have hit upon a similar ‘new normal’ in recent years, but the surge of inflation seen over the past year has changed all that, with the base rate now up to 1.25 per cent and expected to rise further.
As well as the fact that may deter some from taking out mortgages in the short term – not least as people will face other strains on their finances – the simple fact is that interest rates and inflation in Britain do not compare easily to Japan.
For that reason, it remains to be seen if the idea is a realistic prospect, let alone a viable one for those with chequered credit histories. But it does at least show that there is a willingness in high places to at least consider some innovative means of getting more people on the housing ladder, which may mean more ideas are considered in the months and years ahead.
Your home may be repossessed if you do not keep up with your mortgage repayments.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
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