# 50 year Mortgage hits the market



## Clarkej (11 May 2006)

http://money.cnn.com/2006/05/10/news/economy/economy_mortgage/index.htm?cnn=yes

I know it's in the states but maybe we'll have it here soon.

Get  married at 18, 1st kid at 19, 50 year mortgage at 20.
If the government change the retiremennt age up to 70 and you get your 1st child to go as guarantor on the mortage you might be able to fit it all in, otherwise you will have to go for a Mortgage over multiple generations. 

Do you think we'll ever have the 50 year mortgage or mortgages over multiple generations in Ireland ?


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## thewatcher (11 May 2006)

I think irish people are far more intelligent than that and will simply abandon the country once again,with the best and brighest going first.


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## Duplex (11 May 2006)

Ahh.... the fifty year the Methuselah of mortgages, the holy grail of the banking ahem.. industry, perpetual debt.


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## X-Man (11 May 2006)

thewatcher said:
			
		

> I think irish people are far more intelligent than that and will simply abandon the country once again,with the best and brighest going first.


 

do you really think so


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## ClubMan (11 May 2006)

Just because somebody takes out a, say, 50 year mortgage does not necessarily mean that the mortgage will run full term especially if the borrower accelerates the repayments if/when they are in a position to do so. Wonder what the mortgage protection life assurance premiums on a 50 year term would be though? Aren't long term (lifetime?) mortgages common in other jurisdictions (e.g. _German Pfandbrief _(?) mortgages?)?


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## thewatcher (11 May 2006)

X-Man said:
			
		

> do you really think so


 
I do,i'm not saying were going to have mass emigration now or anything.
But the rite of passage of many college students has always been a spell in America,Australia and Europe.The standard of living in these places is far better than ireland at present,and i can certainly see people seriously thinking about coming back to a way overpriced house in the suburbs. What's the point in earning good money,if it's all taken up in mortgage payments ?


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## ClubMan (11 May 2006)

thewatcher said:
			
		

> I do,i'm not saying were going to have mass emigration now or anything.
> But the rite of passage of many college students has always been a spell in America,Australia and Europe.The standard of living in these places is far better than ireland at present,and i can certainly see people seriously thinking about coming back to a way overpriced house in the suburbs. What's the point in earning good money,if it's all taken up in mortgage payments ?


 But the original point was that 50 year mortgages have arrived in the _US _and are not yet here so why would people leave _Ireland _to go somewhere that *does have *50 year mortgages?


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## GoldDigga (11 May 2006)

I heard on the radio this morning that the average lifetime of a mortgage is 21 years.The FTB that takes out 35 or 40 year mortgages is likely to Refinance after a few years and reduce the term of the mortgage. That is, if their financial situation has improved over these first few years


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## Howitzer (11 May 2006)

thewatcher said:
			
		

> What's the point in earning good money,if it's all taken up in mortgage payments ?


 
People used to say exactly this in the 80's, except then they were referring to high taxes.


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## Glenbhoy (11 May 2006)

> I heard on the radio this morning that the average lifetime of a mortgage is 21 years.


That's a worrying statistic - it means that of the people taking out 20/25yr mortgages (as was the norm until recently) very few have managed to repay them early - maybe we are'nt as equity rich as previously thought.


> The FTB that takes out 35 or 40 year mortgages is likely to Refinance after a few years and reduce the term of the mortgage. That is, if their financial situation has improved over these first few years


That's the theory peddled by the banks/brokers etc - since these mortgages have not been available for more than 3/4 years?  It is'nt possible to tell yet what will happen.  We may even see a new phenomennon: 'the remortgage to a longer term' as interest rates rise, and incomes struggle to keep pace with 'lifestyle' costs people may have to further increase terms??


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## thewatcher (11 May 2006)

ClubMan said:
			
		

> But the original point was that 50 year mortgages have arrived in the _US _and are not yet here so why would people leave _Ireland _to go somewhere that *does have *50 year mortgages?


 
http://money.cnn.com/2006/05/10/news/economy/economy_mortgage/index.htm?cnn=yes

"The report of the new 50-year loan comes as the signs mount that the nation's real estate market is cooling."

220 applications,handful of lenders...in a country of how many million people.It's a gimmick nothing else,overhere it's gone so mad something like that could acually take hold  .

I wonder how they'll spin it here !


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## thewatcher (11 May 2006)

Howitzer said:
			
		

> People used to say exactly this in the 80's, except then they were referring to high taxes.


 
It seems that the only people who paid tax in this country in the 80's were the paye workers !...........generalisation of course


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## walk2dewater (11 May 2006)

According to the conventional wisdom in Ireland you're always better off buying rather than renting.  So as long as our banks can structure manageable monthly payment schedules, the price, interest rate, terms etc. are all irrelevant.  50yr mortgages are just a natural extension of this philosophy and are only a matter of time.


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## thewatcher (11 May 2006)

GoldDigga said:
			
		

> I heard on the radio this morning that the average lifetime of a mortgage is 21 years.The FTB that takes out 35 or 40 year mortgages is likely to Refinance after a few years and reduce the term of the mortgage. That is, if their financial situation has improved over these first few years


 
The only way this can happen is if wages increase significantly,does anyone think this is going to happen ?

We have been overpaying ourselves for the last few years compared to all our neighbours,we are becoming more and more uncompetitive this cannot continue !


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## ClubMan (11 May 2006)

Are you sure about that? I am a software engineer and earn a lot less than I could if I moved to the _US _(which I don't want to do). Employing me represents good value (both in terms of cost and productivity) to my _US_ based employer especially in comparison to the staff that they employ over there.


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## Purple (11 May 2006)

ClubMan said:
			
		

> Are you sure about that? I am a software engineer and earn a lot less than I could if I moved to the _US _(which I don't want to do). Employing me represents good value (both in terms of cost and productivity) to my _US_ based employer especially in comparison to the staff that they employ over there.


 I don't know about that CM, can you back it up with hard facts?


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## Duplex (11 May 2006)

According to The National Adult Literacy Agency, Ireland lags behind its competitors in terms of financial literacy.

  [broken link removed]


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## ClubMan (11 May 2006)

The _NALA _itself is illiterate judging by that article! Just look at the dodgy punctuation... 


> Ireland's first ever national independent research into the issue of financial literacy, today revealed that the problem of low financial literacy is not confined to those with literacy and numeracy difficulties, but exists in all income levels.
> 
> ...
> 
> ...


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## colc1 (11 May 2006)

ClubMan said:
			
		

> Are you sure about that? I am a software engineer and earn a lot less than I could if I moved to the _US _(which I don't want to do).


 
Would you not even consider it clubman you could have a beautiful day like today in Florida or California in the middle of winter?


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## Duplex (11 May 2006)

ClubMan said:
			
		

> The _NALA _itself is illiterate judging by that article! Just look at the dodgy punctuation...


 
Ahhh... you forget Clubman. The NALA are representative of the public, and reflect this in their deliberate use of dodgy punctuation.

The staggering fact in the NALA report, is that over 50% of middle income respondents were ignorant of the correct definition of APR.


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## ClubMan (11 May 2006)

colc1 said:
			
		

> Would you not even consider it clubman you could have a beautiful day like today in Florida or California in the middle of winter?


I did consider it a few years back but decided that, for me, the cons out weighed the pros. I am happy where I am.


			
				Duplex said:
			
		

> The staggering fact in the NALA report, is that over 50% of middle income respondents were ignorant of the correct definition of APR.


But what do they mean by "correct definition"? If it's simply "the total/real cost of credit" then that statistic would be surprising/alarming. But if they mean the actual precise technical definition of _APR _then I am not surprised. I don't know this myself and am none the worse for it as far as I can judge.


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## casiopea (11 May 2006)

Clarkej said:
			
		

> Do you think we'll ever have the 50 year mortgage or mortgages over multiple generations in Ireland ?




Its interesting.  Something is going to happen (stating the obvious - thats just life). If you read some of the other forums here and on other boards people talk about the bubble bursting, others talk about continued profits and rising equity.   If prices do continue to rise FTB simply wont be able to afford 35 year mortgages and maybe such packages will come onto the market. They already exist in other countries. Ireland will also be influenced by other EU countries if the model becomes popular say in Germany it might get adopted in Ireland. 

In Switzerland mortgages can last 50 years or longer, all (from what I can tell so far) swiss mortgages are more endownment by nature and they dont offer all the different packages we have at home (tracker, current account etc) also while swiss mortgages have a tendency to extend over a life time (50yrs or more)  you are forced to refinance every 8 years or so. Usually people refinance every 5 years, most investors refinance as frequently as every 3 months benefiting from the low libor (variable) rates. 

Might a 50yr mortgage package be introduced in Ireland - I dont see why not, stranger things have happened.


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## conor_mc (11 May 2006)

casiopea said:
			
		

> while swiss mortgages have a tendency to extend over a life time (50yrs or more) you are forced to refinance every 8 years or so.


 
It'd be interesting to see what costs they incur when refinancing over there. Until very recently, remortgaging could in itself have cost home-owners €1500-2000. At least some lending institutions are covering these costs nowadays as an incentive to move, but even so, the costs are still there!


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## casiopea (11 May 2006)

Apparently its free, not even an admin charge. Even if you're changing bank. Though Im still investigating this.

I should also mention while the term of a swiss mortgage can be 50 years, you can only get a swiss mortgage with a 20% deposit.  There are some variations to this (a 15% deposit but you have equity or a life policy or savings to the value of the other 5%).

No such thing as 100% mortgages for the swiss.


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## thewatcher (11 May 2006)

In order for the irish property pyramid to be sustained,new ways have to be found to pull in more people at the bottom,(interest only,100%,40 year mortgages) don't be surprised to see the 45year mortgage soon.

You'd think the central bank would get their finger out,because the bigger the bubble gets the bigger the bang is going to be.


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## ClubMan (11 May 2006)

Calling the _Irish _property market a pyramid may be good polemics but it's bad analysis. Not everybody who buys property is looking to shift it on again in the short or medium term.  The market does not need multiple entrants into the market for each individual buyer in order to sustain it. Prices will be set by supply and demand. Because supply is relatively low and demand is relatively high prices are high. If/when either or both of those market drivers are altered then prices may react accordingly. One also needs to distinguish between the buy to let and owner occupier markets which obviously overlap but are different kettles of fish (e.g. the former is much more speculative).


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## bearishbull (11 May 2006)

thewatcher said:
			
		

> In order for the irish property pyramid to be sustained,new ways have to be found to pull in more people at the bottom,(interest only,100%,40 year mortgages) don't be surprised to see the 45year mortgage soon.
> 
> You'd think the central bank would get their finger out,because the bigger the bubble gets the bigger the bang is going to be.


Central bank have been warning for years,they cant do much more except maybe raise reserve ratios gradually over next year which they have done for very high LTV ratio.
There may be long term mortgages in other countries but its not necessarily  because houses are ridiculous like here.When the first time buyers cant buy(when banks cant schedule the debt to make acceptale onthly payment) prices will have to fall if it hasnt crashed before that due to negative sentiment.
in past many people would pay off their first mortgage in 12-15 years now its way higher DESPITE both partners in a couple working .
Clubman maybe software engineers are good value here vis a vis america but american jobs are now going to india where they are a tenth of the price.this country is becoming more and more uncompetitive every day ,inflation near 4% wage inflation higher decreasing productivity,its downhill from here.


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## bearishbull (11 May 2006)

ClubMan said:
			
		

> Calling the _Irish _property market a pyramid may be good polemics but it's bad analysis. Not everybody who buys property is looking to shift it on again in the short or medium term. The market does not need multiple entrants into the market for each individual buyer in order to sustain it. Prices will be set by supply and demand. Because supply is relatively low and demand is relatively high prices are high. If/when either or both of those market drivers are altered then prices may react accordingly. One also needs to distinguish between the buy to let and owner occupier markets which obviously overlap but are different kettles of fish (e.g. the former is much more speculative).


maybe pyramid is'nt entirely accurate but if first time buyers dry up sellers of properties that ftb's would buy get hit and the houses further up the "ladder" that they would buy get hit etc etc,i'd call it a self perpetuating cycle that can reverse.


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## ClubMan (11 May 2006)

bearishbull said:
			
		

> in past many people would pay off their first mortgage in 12-15 years now its way higher DESPITE both partners in a couple working .


Not necessarily true. In past decades people have had mortgages many multiples of their annual earnings and were paying double digit rates of interest over long periods. It may be tough for some people to afford the purchase of their own homes now but this does not mean that it was never this way in the past.


> but american jobs are now going to india where they are a tenth of the price.


*Some *American jobs. 


> this country is becoming more and more uncompetitive every day ,inflation near 4% wage inflation higher decreasing productivity,its downhill from here.


Perhaps. Or perhaps not. We'll see...


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## ClubMan (11 May 2006)

bearishbull said:
			
		

> maybe pyramid is'nt entirely accurate but if first time buyers dry up sellers of properties that ftb's would buy get hit and the houses further up the "ladder" that they would buy get hit etc etc,i'd call it a self perpetuating cycle that can reverse.


Like negative equity, all largely irrelevant to owner occupiers who buy to live in for the medium/long term. Somebody who can comfortably afford their mortgage repayments and is not planning on moving in the short/medium term should not be unduly concerned with the value of their _PPR_.


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## thewatcher (11 May 2006)

ClubMan said:
			
		

> Like negative equity, all largely irrelevant to owner occupiers who buy to live in for the medium/long term. Somebody who can comfortably afford their mortgage repayments and is not planning on moving in the short/medium term should not be unduly concerned with the value of their _PPR_.


 
Maybe it's irrelevant to owner occupiers who are happy where they are, but i'd say there's a huge amount of people at the moment who've simply bought to get on the ladder.They see themselves as merely passing through a particular area on the way to somewhere better.How many new estates are there out there,where no one knows their neighbours because they think they'll be somewhere else in a few years,all these people will be affected in a slowdown.They won't lose their house but they'll be stuck somewhere they don't want to live/bring up their kids.


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## ClubMan (11 May 2006)

So what? That's a risk/responsibility that some grown adults decide to take on for themselves. It's not my, your or the market's problem. That's life!


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## beattie (11 May 2006)

ClubMan said:
			
		

> Because supply is relatively low and demand is relatively high prices are high


 
Would only agree with half of this statement, don't know of any other country in the developed world where there is appox 4% being added to the housing stock year on year. There doesn't seem to be any letup in new units coming to market this year.


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## Brendan Burgess (11 May 2006)

GoldDigga said:
			
		

> I heard on the radio this morning that the average lifetime of a mortgage is 21 years.



Do you have any idea who gave these figures? I understand that the average is around 7 years. People either pay off their mortgage or trade up. This 7 years figure is quoted often, but I don't know where it comes from. 

There is nothing at all wrong with using an  interest-only mortgage to buy your home. In fact, I would recommend it to any first-time buyer. There are higher priorities in the first year or two than making capital repayments. When  your finances are back on track, then you can review what level of repayments you are comfortable with and up your repayments or pay off capital as appropriate. 

The most common story is to see people making huge sacrifices early in their working life to repay a mortgage. After a few years, their income has risen with inflation and promotion and their mortgage has become very comfortable. I see friends of mine today who have no mortgage who would have been far better off when they were younger to have enjoyed a bit of life and to have worked a bit less hard so that they could have spent more time with their kids. 

Brendan


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## Calina (3 Jun 2006)

Interesting. 

This whole "average lifetime of a mortgage" definition interests me greatly because it seems to have a movable definition. 

Sometime ago, in an article on current trends in the French property market in Le Monde (don't have a link handy), it was highlighted that the average time taken to pay off a mortgage (as against average life of a mortgage) had risen from 12 to 17 and a bit years. I'm not all that interested in how long the average mortgage agreement exists in Ireland - what would be more illustrative is how long people are carrying mortgage related debt...

Brendan, I'm not altogether sure I agree with your idea that a FTB would be better off with an interest only mortgage [in the first few years at least]. If people are making huge sacrifices to pay mortgages, then I reckon that they have borrowed far, far too much. Currently as a prospective FTB, I can comfortably pay off more than I would require to service on a monthly basis the maximum that a bank would give me on a capital+interest repayment agreement. 

Of course, that maximum is still quite a way below what is available where I'd like to live vis a vis work commute and various other desires, but that's a whole different debate.


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