4 July 2022

50-year mortgages would only make our housing market more dysfunctional


Who would have thought that only two and a half years after securing an historic majority, the Conservatives would have shifted their housing policy from Robert Jenrick’s bold planning reforms to apparently serious discussion about inter-generational mortgages?

Our constitution gives a Prime Minister who commands a majority in the House of Commons enormous power. Yet all it took was getting routed by the homeowner interest in a couple of by-elections to spook the Tories into reverting to their demand-side comfort zone.

There is of course a case, in a totally dysfunctional housing market, for making deposits less onerous and offering loans on longer terms, as the Centre for Policy Studies proposed in their report ‘Resentful Renters’. (Although that plan was to take advantage of then-current historically low rates, so the window may be fast closing.)

A longer repayment period makes loans more accessible at the expense of costing more over the entire repayment period. The end result would be less well-off people paying more for their homes than richer people – even more than they do now, that is – but it would at least mean people got ‘on the ladder’.

But unless Boris Johnson was speaking entirely off-the-cuff (and that can never be ruled out) the Government is thinking about going further. If a 35-year loan is more accessible, would not a 50-year loan be more accessible still? If parents are helping their children buy anyway, why not allow intergenerational mortgages?

Yet there is a world of difference between using family money to buy property on your own terms – whether that be through getting help with a deposit, or spending an inheritance – and inheriting a debt. 

For starters, once you start getting the lifetime of a mortgage almost as long as the span of someone’s adult life, there is a serious question mark about whether you’re really promoting ‘ownership’ in the sense that most people hope for and expect. If one took out a 50-year mortgage at 32, the average age of a first-time buyer in the UK, one would pay it off just in time to start looking seriously about retirement living.

This would obviously be a bit different if you inherited the last 20 years of such a mortgage, but that opens up the prospect of people being saddled with a mortgage for a home their parents chose and missing out on one of the best things about buying your own home: actually buying it and choosing it yourself.

Over time, this system would also threaten to broaden yet further the looming gulf between Britain’s property haves and have-nots.

I don’t buy the argument that because a section of the Millennial generation is set to inherit and another isn’t, it therefore doesn’t have a shared generational interest in a healthy property market. A thirty-year-old who will one day come into a nice Home Counties house or pot of family money still can’t afford to buy a home or start a family in the here and now.

But it will become a problem in the future, and it looks as if inter-generational mortgages will exacerbate it. Those at the most ‘accessible’ end of the spectrum will presumably be taken out by people without a current property to sell, raising the prospect of one set of people inheriting means and opportunity whilst another only debt and obligation.

Worst of all, of course, is the most obvious argument: this move would push up house prices even further, just as every other demand-side policy does. Change the rules so that a new reservoir of credit can be pumped into the housing market, and prices will equalise upwards. That will benefit those who already own property (and those they leave it to) whilst forcing those currently locked out of the housing market onto the path of mortgage-indenture. 

Which, if you think about it, actually makes this the perfect policy for a discreditable chunk of the Tory backbenches and voter base: forcing the less well-off to pay even more for housing via intergenerational debt – one might call that a ‘road to serfdom’ – and further inflating the property values of those who already own in the process. 

Click here to subscribe to our daily briefing – the best pieces from CapX and across the web.

CapX depends on the generosity of its readers. If you value what we do, please consider making a donation.

John Ashmore is Editor of CapX.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.