50-year home loans are on the cards

Fifty-year mortgages are in prospect as first-time buyers struggle to gain a foothold on the housing ladder.

Lenders say soaring property prices mean some loans will take much longer than the traditional 25 years to pay off.

And unless the market slumps, the only way many people will be able to afford a home will be by increasing the term of the loan into retirement age, it is claimed today.

Homeowners who opt to repay a £100,000 mortgage over 50 years will end up paying £272,400 compared with £175,500 over 25 years. This is based on interest rates of 5 per cent.

The problem is particularly acute in London and the South-East, where house prices are the highest in the country. They soared by an average of £18,000 over the year to May, and the average cost of a home in the capital is now £214,000 - nine per cent higher than 12 months earlier.

With demand fuelled by the lowest interest rates for 50 years, more people want to buy their own home, but are put off by high mortgage payments.

One solution may be the "never- ending" mortgage, according to Ray Boulger of brokers John Charcol.

"Loan terms of 30, 40 or even 50 years do not seem as drastic as they would have done 30 years ago when life expectancy was considerably less," he said.

Nationwide and Abbey National are already offering 35-year loans, and the Bank of Scotland 40 years.

? Homeowners look likely to enjoy another reprieve from higher mortgage rates today with City economists predicting that the base rate will be held at a 38-year low of 4 per cent for the seventh month in a row.

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