Unbelievable 40y mortgage

[JohnnyB]

On 25/11/2023 at 15:58, spygirl said:

The big question is whether they feel they can afford the monthly costs, particularly if they are borrowing at six times their annual income.

A debt-free couple earning £30,000 each might be able to borrow £355,000, according to Perenna. A £355,000 mortgage at 5.99 per cent with a fixed term of 40 years will cost £1,951 a month.

However, two people on £30,000 a year will be taking home £2,035 each month after income tax and national insurance is deducted. 

Combined together that's £4,070 after tax - and that's before any pension contributions are included.

After paying the mortgage they will have £2,119 a month left between them.

For many people that would likely be too high a cost. However, for some it may seem like a price worth paying, particularly if their rent was of a similar level.

Just lol

I always think back to the peak age earning stats. 

40ish women, 45ish men

First time buyer average age is 33

https://www.refinery29.com/en-gb/women-reach-peak-earnings-at-40

So 10 years to make headway before it gets harder. Mortgages are no longer being inflated away as cost-of-living will continue to outpace wage rises.

 

25 year mortgage from age 25 worked as came to an end as careers wound down.

This would be a disaster. But you're probably right it's just a scam startup equivalent, stringing investors along whilst shaking their fists at the nasty regulators.

[spygirl]

Still going on 

 

Big FT article

Can long-term mortgages help solve the UK’s housing crisis? Home loans with interest rates fixed for a decade or more could get more buyers on to the ladder — and disrupt a £1.6tn industry

https://www.ft.com/content/2fbedea8-27d6-4c8d-a1ae-6fe867a21371

Like hundreds of thousands of homebuyers in the UK every year, Steve didn’t think twice before applying for a short-term fixed-rate mortgage. It was only when his application was rejected on a technicality that the Somerset-based IT professional looked for other options.

A mortgage broker suggested he try a new lender called Perenna. He was first impressed that the lender “applied a bit more common sense” to the technicality about the terms of the lease on his flat that had stymied his last application. But he also learnt that the mortgage on offer was fundamentally different.

Perenna, which received a full banking licence last year, offers a fixed interest rate for the entire life of its mortgages, up to 40 years.

 

Well, Steves for a 25y fix from them.

 

But the launch of Perenna gives these policy ideas a practical and entrepreneurial champion. For the start-up bank, the stress test is basically irrelevant because the monthly payments never change.

The company says it will lend up to six times the borrower’s income, far higher than the standard 4.5 times from high street banks. And it can lend to retirees provided the repayments are affordable on their fixed income. The interest rates on its loans are between 0.12 and 0.89 percentage points more than the short, fixed deals, depending on the tenure and deposit. But for a couple with a joint income of £60,000,

Perenna says it could offer a maximum mortgage of £307,489, giving the buyer an extra £72,000 compared with a loan on standard terms.

 

...

Perenna does not take deposits, but instead plans to fund mortgages by packaging them into bonds that can be sold to investors. It plans to sell the first bonds this year once it has enough mortgages on its books.

Good chart, which I cant copy.

From 1990, houses owned outright has risen from 35% to 35%

Mortgages houses falen from 40% to 30%

Private rents 10% -> 20%

Social housing fallen ~5%