50 year Mortgage hits the market

[ClubMan]

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.

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.

 

[casiopea]

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.

 

[conor_mc]

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!

 

[casiopea]

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.

 

[thewatcher]

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.

 

[ClubMan]

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).

 

[bearishbull]

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.

 

[bearishbull]

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.

 

[ClubMan]

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...

 

[ClubMan]

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.

 

[thewatcher]

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.

 

[ClubMan]

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!

 

[beattie]

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.

 

[Brendan Burgess]

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

 

[Calina]

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.