COVER
CROSS-GENERATION MORTGAGES
Cross-generation mortgages: What’s the verdict? Experts offer their views on whether they really solve any problems
T
he UK government is considering offering cross-generation mortgages to people who may not be able to pay off their mortgage over the entirety of the term due to their advanced age. When an older mortgage holder dies, their children would take over the mortgage in their name until the loan is paid off. The new plans would see homeowners take out 50-year mortgage terms with little or no expectation of completing mortgage repayments during their lifetimes. It is important to note that inheritance tax is only levied on the net value of the property, so if it is mortgaged when the owner dies, the inheritance tax bill will be lower. Melanie Spencer, business development director and head of payment and mortgage services at finova, explained it is reassuring to see that tackling the housing crisis is high on the government’s agenda. “We are certainly in need of new and exciting ways to help more people onto the housing ladder,” Spencer said. However, she added that the market must exercise a degree of caution when it comes to solutions such as multi-decade mortgages. While relatively long-term mortgages are helping
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MORTGAGE INTRODUCER AUGUST 2022
The new plans would see homeowners take out 50-year mortgage terms with little or no expectation of completing mortgage repayments during their lifetimes. It is important to note that inheritance tax is only levied on the net value of the property, so if it is mortgaged when the owner dies, the inheritance tax bill will be lower many reach their homeownership goals in today’s higher-rate climate, Spencer said the prospect of cross-generation mortgages may carry its own set of risks. “For instance, there is no guarantee that the child being handed the loan will be financially equipped to pay off the debt – and how do we assess their affordability?” she questioned. Mortgage rates are rising at their fastest pace in 15 years; Bank of England figures have revealed the average interest rate on a new home loan www.mortgageintroducer.com
