Major lenders could start to phaseout boom’s 30-year plus mortgages

FEARS have been expressed that banks could begin to phase out 30-year plus mortgages.

Super-term mortgages, which are those that exceed the traditional 30-year mortgage term gained in popularity during the boom years as a means of decreasing monthly repayments for consumers, especially first-time buyers.

All major lenders now offer mortgages that exceed 30-year terms and 35-year terms is one the most common. A few lenders offer a maximum term of 40 years.

Director of the Irish Mortgage Corporation Frank Conway said 35-year and 40-year term loans meant consumers were in a position to purchase property that would have otherwise been beyond their reach financially.

“During the height of the property boom, approximately 18% of first time buyers funded the purchase of their new home with a 40-year mortgage.

“A major flaw in the super term loan product is the increased cost of borrowing incurred by a consumer.”

Mr Conway said it is “not inconceivable” that lenders could introduce a ban on super-term mortgages, as these types of loans artificially increase “affordability” and significantly increase the cost of borrowing to the consumer.

“Now that property prices have crashed, the need for super term mortgages is simply not there. Consumers should be able to fund and purchase property on a simple 30-year contract,” he said.

On €300,000 3% loan the total cost of borrowing on a 40-year loan terms compared to a 30-year loan term is an extra €60,165 over the life of the loan.

“So, even though the client using the 40-year mortgage has 15% more affordability than the same person borrowing on a 30-year term loan, the total cost of interest is 39% greater over the full term of the loan.” said Mr Conway.

Chief executive of the Irish Brokers Association, Ciaran Phelan said that while the banks may be intimating these changes in the hope they will lead to more prudential lending in the mortgage market, this is not a one-size-fits all approach that will act as the perfect panacea to the current problems in the market.


Lifestyle

Four graduates tell Siobhan Howe how their fine art degree has influenced their approach to their working life.What use is a degree in fine art? Four graduates answer the question

Terry Gilliam tells Esther McCarthy about the mystery woman who helped him to finally get his Don Quixote film made after 30 yearsTerry Gilliam: Back in the saddle again

Twitch will no longer be the home of esports for Call of Duty, Overwatch and Hearthstone, with those games (and more) going to YouTube instead.Violence in the stream: Big changes for esports

That may say more about how the media treats flaws and beauty than it says about Alicia Keys herself, but nevertheless, it was refreshing at the time to see someone say no to the Hollywood expectations of beauty.The Skin Nerd: Unlocking Alicia Keys’ secrets to gorgeous skin

More From The Irish Examiner