Lenders are offering 40-year term home loans to struggling would-be buyers. Growing numbers of first-time buyers desperate to get on the housing ladder but struggling to afford sky-high house prices are being encouraged to tie themselves into mortgages lasting 35, 40 or even 45 years. With today's buyers requiring ever-larger home loans, some banks and building societies have come up with a clever trick for bringing the dream of home ownership within their reach: increasing the term of the loan in order to reduce the monthly payments. While your monthly outlay will be lower, by the time the deal comes to an end you'll have paid far more, than if you had a standard 25-year mortgage. If the trend for extending people's mortgage terms accelerates, it could mean we end up waving goodbye to the traditional 25-year loan. Already in the United States, most major banks now offer 40-year mortgages. It all has frightening echoes of the Japanese property bubble of a few years back, when absurdly high property prices led to the development of 100-year mortgages, which were designed to be paid off by the borrower's children and grandchildren. One UK lender is offering a maximum term of 45 years. However, to be fair, this is a mortgage aimed at young professional first-time buyers training to be solicitors, accountants and the like, whose incomes are highly likely to increase substantially over the coming years, and who will be in a better position than most to take action later on. Some might say that if house prices continue to rise in excess of earnings, the only way repayments can remain affordable is by increasing the term of the loan. Article date: July 2006

Articles are copyright protected Goldmine Publishing Limited 2006. Terms and conditions apply. Unauthorised duplication or distribution is strictly forbidden.