Wed 29th Nov, 2006
Mortgage terms getting out of Control
For many people, the prospect of taking out a mortgage with a standard twenty five year term is a daunting prospect. However, if you have ever complained about the term of your mortgage, and the length of time it will take you to repay it, then take a look at the new mortgage from the Abbey that is being offered to teenagers.
The Abbey’s new mortgage is offered at a term of fifty seven years. This, says the bank, is the only way that such borrowers can afford to get on the housing ladder and buy a property that they can live in. Tesco Personal Finance, part of the Royal Bank of Scotland group, also offers mortgages of up to fifty two years.
These loans, say critics, are forcing young people to enter into extraordinary commitments that bare no relation to the reality of the situation. It is difficult to imagine anyone, let along a teenager, being able to properly understand the nature of a mortgage which will last well past their working life, and will stretch to the limits of their life expectancy.
Many have concerns about the lack of freedom and the restraints that such mortgages will put on such borrowers and the effects that this will have on their long term decisions and life paths. There has also been raised, concerns on the grounds of fairness, especially when one looks at the amount of interest that is being repaid if a mortgage is taken on over such extraordinary periods.
Lenders say that they are simply finding ways to allow more young people onto the property market and that as borrowers’ incomes rise as they get older, they will be able to increase their rates of repayment and clear themselves of the debt at a more usual pace.