Mortgage terms could be extended to infinity

According to Moneyfacts.co.uk, 80% of lenders now offer maximum mortgage terms of more than 25 years.

This revelation has evoked a ripple of media posturing as though it’s a big deal. But, frankly, the 40-year mortgage has been around for decades.

Mortgages are a bit like a good meal – rarely taken as a single course. They begin with a starter, are followed by a main course and conclude with dessert.

Sometimes they resemble more gastronomic fare, with chef’s surprise courses added along the way.

A 20-something first-time buyer borrowing over a 25-year term will probably move within five years and take the same again.

This second purchase lengthens their mortgage repayment period to what could then be effectively a 30-year term.

Most buyers seem content to repeat this process ad infinitum, or at least until they are around 40 years old.

At this point, more financially aware people begin considering linking their mortgage term to their retirement age – typically 65.

But the aggregate of successive mortgage terms invariably means that for many people reaching the age of 65, their time as a borrower has already totalled more than 40 years.

Hence my contention that the 25-year term is an illusory norm and that there is nothing new or radical about lengthy loans.

However, the mortgage landscape is changing. And two factors that influence mortgages are combining to create an environment in which 50-year terms could become the norm. First, house prices have rocketed, requiring many would-be home owners to seek mortgages well beyond the borrowing potential suggested by traditional income formulae.

Second, to meet this demand, lenders are encouraging borrowers to commit to loans far greater than their in-comes seem able to support over standard 25year terms.

So as an alternative to penury, why not extend mortgage terms to reduce monthly costs – to infinity if necessary – if this enables home owners to better afford their monthly repayments out of net income?

As our society no longer seems to recognise the word restraint and affordability has simply become a euphemism for reckless excess, maybe a loan for life is the only sensible way forward. And it comes with Inheritance Tax advantages too.

Repaying mortgage debt as quickly as possible obviously makes financial sense. And doubling a mortgage term pretty much triples what has to be paid back.

But what makes for fiscal prudence and what punters choose to do rarely make comfortable bedfellows.

And with the retirement age now another moveable feast, perhaps there’s no longer any need for borrowers to consider their 65th birthday as the target date by which all debts should be cleared.

What’s more, if leaving your mortgage to your kids keeps your head above water through to the petit fours, coffee and brandy of your life, why not? The little sods probably kept you on bread and scrape for most of it anyway.