Very long or interest only mortgages

I would be shocked if that’s the case from today.

My parents actually moved house in ‘95 and the value today is probably five times higher or thereabouts.

It’d be a brave man or woman who’d bet on the price in 2047 being 5 times higher again.
 
If I'm still around to pay out on it, I'll take your bet! ;)

In any event; the proposal is more in relation to mortgage duration & interest only.

Lest we stray into the forbidden zone of house prices.
 
The relevance of prices is that a 90% mortgage could not be interest only because it could easily be plunged into negative equity over the life of the mortgage.

I see 50% interest only mortgages as being very good for the bank.

In some situations they would suit the lender as well.

A mortgage is just renting money.

We don't tell someone who is renting a house that their position is unsustainable.

It's better to be well off - mortgage free and a fat pension and an education fund for the kids, but long-term cheap borrowing on the security of the home is fine.

Caveat: When I initially proposed this I did not allow for irresponsible borrowing. Bank of Scotland Ireland gave people 20 year interest only loans and a lot of them are in difficulty now because they didn't make plans to repay them and no one else will refinance them.

Brendan
 
Thirsty said:
However, I think if you took any 30 year period, you'd likely see a similar pattern.
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Pretty unlikely. The 92-02 period saw absolutely phenomenal per capita economic growth. Also a large, structural reduction in interest rates due to the euro.

Very hard to repeat either of those two events, never mind both.
 
Go back even further - anyone want to research?

1900 - 1930
1930 - 1960
1960 - 1990

In any event - the mortgage duration / interest only isn't predicated on house prices; again lest we stray that direction!
 
Thirsty said:
Go back even further - anyone want to research?

1900 - 1930
1930 - 1960
1960 - 1990

In any event - the mortgage duration / interest only isn't predicated on house prices; again lest we stray that direction!
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Instead of looking at Mortgage duration have a look at Birth rates, in Ireland per 1000 females total fertility rate
1900-1930 around 2.9 approx
1930-1954 around 2.7 approx
1954-1982 around 3.8 approx
1982-1991 around 2.6 approx
From 1992 on Ireland birth rate is under 2 except 2007-2010
2007 2.04
2008 2,09
2009 2.10
2010 2.07
2011 2.03
it has been falling since then it is now at 1.60
in other words, you need to be over 2 for the population to replace itself,
who is going to pay the mortgage,
who is going to keep the life insurance paid until the die-off to inherit a wasteland,
if you were a couple or single with no family the above suggestion looks good,
don't forget part of the reason house prices are so high is there are lots of couples and single people not having any family who can afford to pay above the odds for scarce housing stock,
 
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kinnjohn said:
who is going to pay the mortgage,
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The lack of children is probably an advantage and not a disadvantage!

If I die without children but I have a mortgage, my estate will clear the mortgage.

The problem in Ireland is that if the kids refuse to leave the house and refuse to pay the mortgage, the lender would find it very hard and very expensive to get them out.

Brendan
 
Brendan Burgess said:
.. refuse to leave the house and refuse to pay the mortgage, the lender would find it very hard and very expensive to get them out.

Brendan
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That's an issue with all mortgages & I 100% agree with you on this one.

Housing appears to be the one utility we are prepared to let people have for free for years, even a decade.

There is no other bill that you might have where the provider will let you continue using the service / product without paying for it.
 
kinnjohn said:
Instead of looking at Mortgage duration have a look at Birth rates, in Ireland per 1000 females total fertility rate
1900-1930 around 2.9 approx
1930-1954 around 2.7 approx
1954-1982 around 3.8 approx
1982-1991 around 2.6 approx
From 1992 on Ireland birth rate is under 2 except 2007-2010
2007 2.04
2008 2,09
2009 2.10
2010 2.07
2011 2.03
it has been falling since then it is now at 1.60
in other words, you need to be over 2 for the population to replace itself,
who is going to pay the mortgage,
who is going to keep the life insurance paid until the die-off to inherit a wasteland,
if you were a couple or single with no family the above suggestion looks good,
don't forget part of the reason house prices are so high is there are lots of couples and single people not having any family who can afford to pay above the odds for scarce housing stock,
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Off topic, but requires noting - the idea of a 'replacement rate' is a theoretical one, often looked at in isolation. Excluding migration, Ireland's population increased by 840k since 1991 (the year we tracked below the 'replacement' rate of 2.1) - births have continued to exceed deaths in each year since then. Data is from the CSO.
 
kinnjohn said:
Instead of looking at Mortgage duration have a look at Birth rates, in Ireland per 1000 females total fertility rate
1900-1930 around 2.9 approx
1930-1954 around 2.7 approx
1954-1982 around 3.8 approx
1982-1991 around 2.6 approx
From 1992 on Ireland birth rate is under 2 except 2007-2010
rob oyle said:
Off topic, but requires noting - the idea of a 'replacement rate' is a theoretical one, often looked at in isolation. Excluding migration, Ireland's population increased by 840k since 1991 (the year we tracked below the 'replacement' rate of 2.1) - births have continued to exceed deaths in each year since then. Data is from the CSO.
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I know I am not stating this correctly
If you look at the birth rates between 1900 and 1991
My generation between 1954 to 1982 had 71% more offspring than the generation between 1900 and 1954 and 1982 to 1991 put together,
a good bit of the 840K can be accounted for by the extra 71% and their offspring again, all of that required extra housing on a once-off basis,
The generation who produced this extra housing requirement are living longer so fewer houses get freed up,
What I am saying it is a good idea to start writing mortgages for houses that nobody might need and still have a mortgage outstanding on the owner's death,

the birth rate in 2020 was 1.6 it was a hundredth % higher between 1954 and 1892, the question is will the 2020 generation be interested in paying off mortgages left behind by the generation before them on houses that may no longer be require,

I hope this is not considered off-topic, Before you take out a mortgage from a bank you need to know it can be paid back fully, and not left to someone who might not be in a position pay it off,
 
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kinnjohn said:
I hope this is not considered off-topic, Before you take out a mortgage from a bank you need to know it can be paid back fully, and not left to someone who might not be in a position pay it off,
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Hi Kinn

I couldn't afford to service a mortgage of €500k.

But if you want to leave me a house worth €2m with a mortgage of €1m, I will gladly take it.

Brendan
 
Brendan Burgess said:
Hi Kinn

I couldn't afford to service a mortgage of €500k.

But if you want to leave me a house worth €2m with a mortgage of €1m, I will gladly take it.

Brendan
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The million Doller question is will you take it if there's is a glut of housing and no market for them and nobody is interested in buying or renting them and the mortgage is still 500K and the house is a liability with lots of extra service charges as young people and banks struggle with a pension time bomb and a mortgage time bomb left behind by the present generation, and the house cannot be given away for nothing,

You would need to pay to get rid of it like a not so old car or a car tire in 2021,

You think it is not possible just think of buy to lets 2008 right up to the present day,
I bought one for less than what an average person would have in an emergency fund,
 
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If you give me a house worth €2m with a €500k mortgage, I will take it and probably sell it immediately.

If you offer me a €500k house with a €2m mortgage, I will decline it.

None of us is able to forecast the future of house prices.

There may well be demographic pressures which act to reduce house prices.

But that should not stop lenders giving 50% indefinite interest only mortgages.

If your doomsday comes to pass, the banks will have lost a lot more on 90% repayment mortgages than on 50% interest only mortgages.

In fact, long before your doomsday comes to pass, the banks will have lost much more on 90% repayment mortgages than they will have lost on 50% interest only mortgages.

Brendan
 
It is not doomsday Brendan,
It happens right across Eastern Europe and parts of the USA all the time they don't think it is doomsday at all

I bet there are posters reading this who have known people in Ireland who signed all of their wealth over to neighbors just to spend the few weeks in their life in their own home, Instead of their close relatives,
 
kinnjohn said:
I bet there are posters reading this who have known people in Ireland who signed all of their wealth over to neighbors just to spend the few weeks in their life in their own home, Instead of their close relatives,
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Never heard of anything of this nature! Are these 'neighbours' paying tax on their newly acquired wealth?
 
kinnjohn said:
I bet there are posters reading this who have known people in Ireland who signed all of their wealth over to neighbors just to spend the few weeks in their life in their own home, Instead of their close relatives,
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John

I have no idea what you are talking about.

Thirsty has raised an interesting point and you are now going further and further off topic.

Your point seems to be
"The banks should not give out interest only mortgages in case house prices crash to zero due to demographic changes"

You might start a separate thread on that idea, and we can link from this thread to it.

Brendan
 
Thirsty said:
Never heard of anything of this nature! Are these 'neighbours' paying tax on their newly acquired wealth?
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I am sure they are They were not expecting it, In fact, there was a time when they were afraid to put their foot on the wrong side of the fence,
Thirsty Just to be clear I am not out to knock your suggestion,

We need to start building more houses the sooner the better, We need to have a conversation about what we want
to Build and how we will pay for them what will become of them if our Demographics go in the direction where we have an oversupply of houses in a few generations,

I have seen houses in Austria where there have a very long mortgage but they are five or six-story high and several generations live in the same house, to be honest, my Daughter had one floor leased at one stage,

This might be worth investigating in a large city like Dublin where landlord and tenant live in the same house on different floors,
,
 
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Thirsty said:
Why do banks insist on mortgages being repaid in full by age 65?
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Because OAP rate is only 225 or something like that, which for most mortgages would be insufficient. Pension coverage is poor, and so most people don't have what banks regard as an occupational pension, so for most they will only lend to 65.
However, some Irish banks DO go up to 70, the caveat being you must have an occupational pension - generally if you work for a traditional company (i.e. a financial services outfit or public service) they will easily go to 68 and sometimes more.
 
Thirsty said:
This is true; but is that a barrier?
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No, the barrier is the likelihood that you will have the same income as you do today. Think its more about pension coverage than life cover.
You can get life cover for older people without too much difficulty - its just a lot more expensive.
 
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