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In the UK, around a fifth of mortgages are interest-only, which I guess is effectively an infinite-term mortgage. In comparison, at least you're paying some pa

In the UK, around a fifth of mortgages are interest-only, which I guess is effectively an infinite-term mortgage. In comparison, at least you're paying some part of the capital back on a 100 year mortgage. Of course, both are storing up trouble for the future. https://www.ft.com/content/4e0377e6-6ad4-11e7-bfeb-33fe0c5b7eaa https://www.ft.com/content/4e0377e6-6ad4-11e7-bfeb-33fe0c5b7...

manarth 9y ago
Does the FT article give any details of how that fifth is broken down? I suspect they'd be predominantly buy-to-let; my understanding is that there are significant barriers to getting an interest-only residential mortgage.
charlesdm 9y ago
If you're getting an interest only mortgage, at least you know what you're getting into. They're great for investment properties and other investments, not so much for your main residence. Then again, there is the problem of refinancing when the end date comes due, which is probably why you have 100+ years mortgages in Sweden.
awjr 9y ago
I would agree that my interest only mortgage is storing up trouble for my future. However given I bought my 1st house in 1996 with no deposit, the reality is that interest only has worked well given that I have leveraged the housing market over 20 years and have now have a mortgage that is around 40% of the value of the house and is probably enough to move somewhere significantly less expensive and retire. However I recognise that my gain is also a problem for my teenage daughter who will struggle immensely to get on the housing ladder. In the UK, it really does not help that housing is considered an investment opportunity. I have a feeling rent control is the only way we will ever get to the point where we remove this 'investment' opportunity. More interestingly, it's within landlord's interest to work with developers to ensure whole developments are primarily bought up by landlords to maintain the value of housing stock.
- conanbatt 9y ago
  > I have a feeling rent control is the only way we will ever get to the point where we remove this 'investment' opportunity. And also remove the opportunity to live in the city. Rent-control is one of those policies that the economic community has consensus that its one of the worst things you can do. "In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing."
- GordonS 9y ago
  Interest-only mortgages can work well - but only if you know what you are doing. Historically at least, the biggest issue with these kinds of mortgages is that most people simply don't.

manarth 9y ago

Does the FT article give any details of how that fifth is broken down? I suspect they'd be predominantly buy-to-let; my understanding is that there are significant barriers to getting an interest-only residential mortgage.

charlesdm 9y ago

If you're getting an interest only mortgage, at least you know what you're getting into. They're great for investment properties and other investments, not so much for your main residence. Then again, there is the problem of refinancing when the end date comes due, which is probably why you have 100+ years mortgages in Sweden.

awjr 9y ago

I would agree that my interest only mortgage is storing up trouble for my future. However given I bought my 1st house in 1996 with no deposit, the reality is that interest only has worked well given that I have leveraged the housing market over 20 years and have now have a mortgage that is around 40% of the value of the house and is probably enough to move somewhere significantly less expensive and retire. However I recognise that my gain is also a problem for my teenage daughter who will struggle immensely to get on the housing ladder. In the UK, it really does not help that housing is considered an investment opportunity. I have a feeling rent control is the only way we will ever get to the point where we remove this 'investment' opportunity. More interestingly, it's within landlord's interest to work with developers to ensure whole developments are primarily bought up by landlords to maintain the value of housing stock.

conanbatt 9y ago
> I have a feeling rent control is the only way we will ever get to the point where we remove this 'investment' opportunity. And also remove the opportunity to live in the city. Rent-control is one of those policies that the economic community has consensus that its one of the worst things you can do. "In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing."
GordonS 9y ago
Interest-only mortgages can work well - but only if you know what you are doing. Historically at least, the biggest issue with these kinds of mortgages is that most people simply don't.