What does the UK govt have to do with this? Surely it’s just a matter for a bank to choose to offer this product.
I was so intrigued i read TFA… turns out this is an entire article conjured out of an off hand comment in a far larger conversation that wasn’t about this topic:
Boris: blah blah blah
Reporter: blah blah
Boris: blah blah blah
Reporter: would that include multi generational mortgages?
Boris: yes, i’m open to any ideas
Reporter: back to unlrelated blah blah
I wonder sometimes whether interactions like these are set-ups and about plausible deniability when assessing the potential popularity of a new policy.
In this scenario, the government gets to say - “ahhhh…it was just an offhand comment”, whilst checking whether it moves the needle for a demographic now quite hostile to the Conservative party.
Also - not really journalism, but some form of propaganda. The owner/editor of this paper is a big supporter of Boris Johnson and was made a lord for his efforts.
To which extent, I also sometimes wonder if this is how a population is softened up to bad policies: firstly it’s trailed as an outside possibility, before it’s progressively brought in from the cold, such that when it lands there is little emotional pushback, just resigned acceptance.
They're the ultimate regulator of the mortgage market - as with most nations with elaborate financial systems these days - and will decide what mortgage products may be offered to consumers or not.
Boris used to be a journalist, don't forget. It's funny how some of these 'off the cuff' remarks end up becoming Govt policy sooner or later. Like when stuff is leaked weeks before any official announcement as a way of softening the eventual blow.
I believe 40y is presently the maximum allowed by the regulator, and there are probably more stringent checks or other requirements to meet the longer it is, evidenced by the relative abundance of lenders offering 25/30y terms vs. 35/40.
That was my first thought exactly. I find it incredible that there are so many proposed pretend solutions when the real cause is well-understood. I wonder if they are just faking it, truly incompetent or incapable or if I am missing something.
Home owners are a large voting block and would never support a government that tries to lower house prices. This is why all solutions are based around increasing supply of credit, which can help but also further inflate prices.
I suggest renters who believe in housing long term buy REITs until they can afford to buy.
Conservative voters tend to be older, own a home purchased years ago, have a lot of their net worth and personal retirement funds tied up in its increased value, and worked a long time for a private pension which has a lot of investments in property. It would need an 80-90% drop in house prices round here to return to even the levels of 1995, and if you told your main voting block that was your plan - reduce a big chunk of their net worth and pension funds by that much - they wouldn't vote for you anymore. Plus you'd have a less estate taxes coming in, and a lot more homeless pensionless elderly people for the state to take care of. And if you told people who paid into the system all their lives that you were doing it to help young people who have (comparatively) paid in much less and (popular media perception) have it easier, are more entitled and lazier, that also doesn't go down well.
> "when the real cause is well-understood"
I don't know what you are thinking there, but a lot of people suggest "not enough homes" is the real cause and "build more homes" is a solution; but most people in the UK live in a home, there aren't very many homeless, and there's not much benefit in having so many houses beyond a bit of slack in the system, building tons more of them just to sit empty year on year would be a waste. The real cause is not a single cause - the homes people live in tend to be owned by landlords instead of themselves, cheap credit means people can borrow more to buy houses so they can outbid others, pushing others to borrow more in response, pushing all prices up. The rise of buy-to-let mortgages helping people afford more houses now than they could in the past, increasing competition and pushing up prices that way. Inflation and the devaluing of the £, if the value halves in real terms then a £50k house becomes a £100k house and appears more expensive. Pension funds and private investments allowed in the housing market where commercial groups can throw around a lot more money than individual buyers and pay more for the more desirable properties. Competition among estate agents incentivised to present houses as worth more to get more commission; council tax, rates, and some taxes being adjusted based on house value/size/location and cheap credit meaning people can borrow to have a kitchen redone or an extension built - many small incentives like that for different groups to increase the value or argue that the value is higher than (some previous level) for their benefit. The ability for wealthy foreigners to buy property in the UK which they don't intend to live in, but want to use as some kind of diversified asset portfolio or laundering (e.g. a house valued in Pounds Sterling, instead of a bank account valued in Rubles or Renminbi) rather than the government acting to keep houses for habitation and nothing else, the rise of personal cars in the last fifty years meaning people can commute long distances into London so they are willing to pay more for a house in a village than anyone who wants to live and work in the village can afford...
There's all kinds of causes and influences; there's only two ways out that I can see - either a sweeping change to houses for habitation only not investment or landlording or anything, which will collapse a lot of people's wealth and be extremely unpopular, or a devaluing of currency until a half million pound house is something anyone can afford because that's not much money anymore.
There isn’t anything that can be done to lower housing costs without angering current owners. Returning to the 1960s rules on zoning and approval would massively increase the number of houses being built but also devalue a lot of peoples “investments”. Winners would be any one renting now and anyone in the construction business. So most likely nothing will be done to lower housing prices.
> Families could be offered “multi-generational” 50-year mortgages allowing parents to pass on outstanding debt to their children, under plans being considered by Downing Street.
This is a but misleading. By the sound of it, the inheritors are choosing to take on the asset and debt at the time of issuance. The deceased cannot choose to just saddle their inheritors with their debt without their signature on the loan.
In Sweden it's not uncommon to have mortgage terms of 105 years. The maximum was reduced from 140 years in 2016. Obviously whether the descendants of the borrower can choose whether to keep paying or not when they inherit the load, but they're definitely not signing up at the beginning.
True, but the way housing is handled in Sweden is a bit different - mortgage rates are almost always so low that it nearly always makes sense to hold a mortgage and invest the money elsewhere.
The introduction of the 30 yr mortgage made homes "more affordable" but then eventually became an enabler of still higher prices; both at closing and over the lifetime of the loan (i.e., total cost).
What's to say 50 yr won't do the same? Unless supply is going to be seriously addressed, this is simply another gov New Coke program. First sip tastes good and then it degrades over time to the point it needs to be euthanized.
But a 50 yr "sure thing"? What banker won't love that? Nice job Boris.
More houses would actually improve affordability, because it would increase supply obviously - but as we see while announcing such a programme is popular, implementing it is not. Thus Tories like to announce big house-building programmes slightly before an election - look at all these houses we're building. After the election when it comes time to actually figure out where all these houses would go (many BANANA†s are Tory voters), the programme is back-burnered or entirely eliminated, then it can be resurrected for the next election. So this announcement basically only signals Boris does not intend to hold an election very soon.
† Build Absolutely Nothing Anywhere Near Anyone/Anything
The same rules apply to college loans. The loans increased demand and allows the market to bear higher prices. What happened next should be a mystery. Yet the plan to fix it is either debt forgiveness (not a solution per se) or more loans.
The failure to see the pattern is a failure of the US higher edu system. The irony funny. Sad but funny.
Can we just flip "money" into "debt" altogether already? It's not like most people have any money to begin with and now they want to make it even harder to ever have anything.
Boris is doing this so he can delay the collapse of the economy btw.
A smart government would incentivise the population to invest in British industry, which would develop the economy and reduce this ridiculous industrial-investment-killing monster in the shape of the property market. But, this is England: a place where good ideas that might benefit the masses are generally either strangled at birth or sold off for a pittance.
Not that far away from permanent rentals owned by the state, where you gain whatever equity is added while you temporarily control it. Then you pass the rental off to the next person. Your max monthly payment is a calculation based on your income which declares the highest rental you can afford.
House prices are mostly determined by how much leverage people can get to buy them. Look for example at unmortgageable houses (eg. due to construction type or land covenant), and they are around 5x cheaper for a similar living space.
House prices must continue to rise, or the debt-tower collapses, and everyone ends up penniless. Some people say thats what they want, but a real uncontrolled housing collapse would be far worse than 2008, and would likely end in a multi-generational economic downturn.
Successive governments have taken lots of moves to maintain high prices - "help to buy" ISA's, shared ownership, small downpayment mortgages, 'affordable' housing, etc.
Those things are also very politically convenient because to the layperson they seem like ways to make housing more affordable, when in fact the market result is house prices rise further.
Will there ever be an end to the rises? Maybe not... Inflation in the British Pound has gone on for hundreds of years. House price inflation can do the same. Will they continue to rise faster than inflation? Maybe... If you can construct more and more elaborate ways to get higher leverage. There are lots of options left, like for example the government could back mortgages with interest rates below market rate.
I tend to disagree. If anything, it would make everything more expensive and at the same time more unstable.
The school of thought that I subscribe to in economy is that everything is priced in. Relaxing the terms of lending increases risk, drives up the price of said mortages und amplyfies the fallout in times of market turmoil.
Edit: Reread your comment, we are in fact in agreement.
> House prices must continue to rise, or the debt-tower collapses, and everyone ends up penniless.
It's not a smart move. Price cannot and do not trend in one direction forever. This is natural force to discover market clearing prices and thus efficient resource allocation. The only difference is how bad the pullbacks are.
Just ask any central bank which has lost a battle against the free markets (which is all of them). It's much more costly.
It’s not a smart move. Doesn’t really address the real issue.
Young folks in the U.K. already have it hard enough. Nothing is going their way.
I see other in this thread maintaining that this sort of thing is normal. Well I think they’ve been conditioned to think it’s normal. To me it’s not normal to pass on debt to children. We’d all prefer to pass on wealth to our children.
U.K. need to address the issue of supply. They also need to address the issue of individuals building up so called property empires. Our whole perspective around housing in U.K. has to change. It’s an utter mess.
He’s trying to prop asset prices up for current homeowners who are outraged at what interest rate rises are doing to the “earnings” they made from their home over the last few years. We’ve gone from a world where people’s homes made more than they did to a world where people’s homes are losing value faster than they can save. Of course a politician wants to stop the bleeding.
I don't undersand what changes (besides the duration of the mortgage) I have no idea how the UK laws work, but in Italy the mortgage repayment is passed on to heirs, it is a debt like any other one.
It is a common enough scenario when someone dies prematurely even with "usual" 15-20-25 years mortgages.
They’re not as popular now as interest rates are low enough to make a repayment mortgage affordable to most. Coupled with their association with the Endowment Mortgage scandal [1] they’re not that popular in the UK anymore except as an equity release option.
I guess that is only the case if the inheritors are willing to keep the property. Usually, in most countries, debt is settled with the deceased estate, not with their descendants.
>Usually, in most countries, debt is settled with the deceased estate, not with their descendants.
I am not sure to understand, maybe Italy is the outlier, here after someone dies, the heirs (either determined by the Law or nominated in a will) either accept or refuse the inheritance "as a whole", and the inheritance is composed of credits (like money in the bank, estate/houses, other properties, etc.) and debts (including mortgages, debts or loans taken from privates, past unpaid taxes and similar, etc.).
In most cases there is not (anymore) a mortgage on the houses, but if there is, all obligations are part of the inheritance and are passed on to the heirs (if they accept the inheritance).
There are "special" life insurance policies that cover the residual mortgage repayments in case of death, and while many (I believe most if not all) banks will require one of these they are not mandated by Law, so it may happen that the morthage debt is transferred to the new proprietor(s) of the estate, i.e. the nominated heir(s).
I don't know Italy laws, but everywhere that I'm familiar with, debt doesn't automatically pass to heirs. The heirs can always choose to not take the house, and thus not take the debt either. The house will be sold to pay the debt, if it's insufficient then the lender loses out.
Yes, that is exactly like it works in Italy, the inheritance is made of credits/assets+debts, the heir(s) can (should) evaluate the + and the - and then have the option to either accept or refuse the inheritance as a whole (the good and the bad together).
It is not common that heirs refuse an inheritance as usually the overall balance is positive, but it can happen, in these cases (like the case where there are no known heirs) the whole inheritance goes to the state, that proceeds - as you said - to liquidate the property and repay - in whole or partially - the debts.
In Sweden you can get an 100-year mortgage (pretty much interest-only), it used to be common for people buying for just a year or two and then selling at a higher price.
You can only fix the interest rate for 3-10 years at a time though.
That's.. interesting - seems kind of like packaging up 'renting + levered bet on housing market', it's not obvious to me why the ordinary person would want that, or the state see fit to let them?
But it's partly due to the Bostadsrätt system where you own like the right to an apartment in a co-op rather than the actual physical building.
Renting in Sweden is completely terrible (unless you're lucky enough to get a first hand contract - mandatory rent-controlled rents), so it's nice to have a middle-ground where you don't need a lawyer, etc. and deal with building issues and property tax, at the cost of paying the board maintenance. This has also helped to control prices a little (until COVID) by preventing absentee landlordism being profitable (or even possible in most cases).
The first hand contract system really sucks though, as it means you're always kind of subsidising those lucky enough to get a first hand contract. For example you might be paying 40% income tax (and 25% sales tax, and then your mortgage) which is then used to bring in unskilled, uncooperative criminal "asylum seekers", which the government then provides a subsidised first-hand contract to in your neighbourhood so they can commit crimes in your area - and you've paid for all of it!
What does the UK govt have to do with this? Surely it’s just a matter for a bank to choose to offer this product.
I was so intrigued i read TFA… turns out this is an entire article conjured out of an off hand comment in a far larger conversation that wasn’t about this topic:
Boris: blah blah blah Reporter: blah blah Boris: blah blah blah Reporter: would that include multi generational mortgages? Boris: yes, i’m open to any ideas Reporter: back to unlrelated blah blah
No wonder journalism gets a bad rap.
I wonder sometimes whether interactions like these are set-ups and about plausible deniability when assessing the potential popularity of a new policy.
In this scenario, the government gets to say - “ahhhh…it was just an offhand comment”, whilst checking whether it moves the needle for a demographic now quite hostile to the Conservative party.
Also - not really journalism, but some form of propaganda. The owner/editor of this paper is a big supporter of Boris Johnson and was made a lord for his efforts.
To which extent, I also sometimes wonder if this is how a population is softened up to bad policies: firstly it’s trailed as an outside possibility, before it’s progressively brought in from the cold, such that when it lands there is little emotional pushback, just resigned acceptance.
You are probably right.
There are several governments known to operate this way. Vietnam is a notable example. They always drop some feelers before enacting policy.
> What does the UK govt have to do with this?
They're the ultimate regulator of the mortgage market - as with most nations with elaborate financial systems these days - and will decide what mortgage products may be offered to consumers or not.
Boris used to be a journalist, don't forget. It's funny how some of these 'off the cuff' remarks end up becoming Govt policy sooner or later. Like when stuff is leaked weeks before any official announcement as a way of softening the eventual blow.
I believe 40y is presently the maximum allowed by the regulator, and there are probably more stringent checks or other requirements to meet the longer it is, evidenced by the relative abundance of lenders offering 25/30y terms vs. 35/40.
The UK government continues to look at all solutions to the housing crisis, except any that would lower house prices in real terms.
That was my first thought exactly. I find it incredible that there are so many proposed pretend solutions when the real cause is well-understood. I wonder if they are just faking it, truly incompetent or incapable or if I am missing something.
A large proportion of the Conservative MPs are landlords, and so stand to gain substantially from perpetuating ever increasing house prices and rents.
Home owners are a large voting block and would never support a government that tries to lower house prices. This is why all solutions are based around increasing supply of credit, which can help but also further inflate prices.
I suggest renters who believe in housing long term buy REITs until they can afford to buy.
Conservative voters tend to be older, own a home purchased years ago, have a lot of their net worth and personal retirement funds tied up in its increased value, and worked a long time for a private pension which has a lot of investments in property. It would need an 80-90% drop in house prices round here to return to even the levels of 1995, and if you told your main voting block that was your plan - reduce a big chunk of their net worth and pension funds by that much - they wouldn't vote for you anymore. Plus you'd have a less estate taxes coming in, and a lot more homeless pensionless elderly people for the state to take care of. And if you told people who paid into the system all their lives that you were doing it to help young people who have (comparatively) paid in much less and (popular media perception) have it easier, are more entitled and lazier, that also doesn't go down well.
> "when the real cause is well-understood"
I don't know what you are thinking there, but a lot of people suggest "not enough homes" is the real cause and "build more homes" is a solution; but most people in the UK live in a home, there aren't very many homeless, and there's not much benefit in having so many houses beyond a bit of slack in the system, building tons more of them just to sit empty year on year would be a waste. The real cause is not a single cause - the homes people live in tend to be owned by landlords instead of themselves, cheap credit means people can borrow more to buy houses so they can outbid others, pushing others to borrow more in response, pushing all prices up. The rise of buy-to-let mortgages helping people afford more houses now than they could in the past, increasing competition and pushing up prices that way. Inflation and the devaluing of the £, if the value halves in real terms then a £50k house becomes a £100k house and appears more expensive. Pension funds and private investments allowed in the housing market where commercial groups can throw around a lot more money than individual buyers and pay more for the more desirable properties. Competition among estate agents incentivised to present houses as worth more to get more commission; council tax, rates, and some taxes being adjusted based on house value/size/location and cheap credit meaning people can borrow to have a kitchen redone or an extension built - many small incentives like that for different groups to increase the value or argue that the value is higher than (some previous level) for their benefit. The ability for wealthy foreigners to buy property in the UK which they don't intend to live in, but want to use as some kind of diversified asset portfolio or laundering (e.g. a house valued in Pounds Sterling, instead of a bank account valued in Rubles or Renminbi) rather than the government acting to keep houses for habitation and nothing else, the rise of personal cars in the last fifty years meaning people can commute long distances into London so they are willing to pay more for a house in a village than anyone who wants to live and work in the village can afford...
There's all kinds of causes and influences; there's only two ways out that I can see - either a sweeping change to houses for habitation only not investment or landlording or anything, which will collapse a lot of people's wealth and be extremely unpopular, or a devaluing of currency until a half million pound house is something anyone can afford because that's not much money anymore.
2 replies →
We've tried nothing and we are all out of ideas!
how can they do this without picking the winners (and losers)?
There isn’t anything that can be done to lower housing costs without angering current owners. Returning to the 1960s rules on zoning and approval would massively increase the number of houses being built but also devalue a lot of peoples “investments”. Winners would be any one renting now and anyone in the construction business. So most likely nothing will be done to lower housing prices.
But they already pick winners (landlords, owner occupiers, right-to-buy recipients) and losers (private renters)
> Families could be offered “multi-generational” 50-year mortgages allowing parents to pass on outstanding debt to their children, under plans being considered by Downing Street.
This is a but misleading. By the sound of it, the inheritors are choosing to take on the asset and debt at the time of issuance. The deceased cannot choose to just saddle their inheritors with their debt without their signature on the loan.
In Sweden it's not uncommon to have mortgage terms of 105 years. The maximum was reduced from 140 years in 2016. Obviously whether the descendants of the borrower can choose whether to keep paying or not when they inherit the load, but they're definitely not signing up at the beginning.
True, but the way housing is handled in Sweden is a bit different - mortgage rates are almost always so low that it nearly always makes sense to hold a mortgage and invest the money elsewhere.
The introduction of the 30 yr mortgage made homes "more affordable" but then eventually became an enabler of still higher prices; both at closing and over the lifetime of the loan (i.e., total cost).
What's to say 50 yr won't do the same? Unless supply is going to be seriously addressed, this is simply another gov New Coke program. First sip tastes good and then it degrades over time to the point it needs to be euthanized.
But a 50 yr "sure thing"? What banker won't love that? Nice job Boris.
More houses would actually improve affordability, because it would increase supply obviously - but as we see while announcing such a programme is popular, implementing it is not. Thus Tories like to announce big house-building programmes slightly before an election - look at all these houses we're building. After the election when it comes time to actually figure out where all these houses would go (many BANANA†s are Tory voters), the programme is back-burnered or entirely eliminated, then it can be resurrected for the next election. So this announcement basically only signals Boris does not intend to hold an election very soon.
† Build Absolutely Nothing Anywhere Near Anyone/Anything
What are the odds that prices would rise? I would say pretty darn high.
Japan tried to push 99 year mortgages back in the 1980s and they didn't last long until their property values collapsed.
The same rules apply to college loans. The loans increased demand and allows the market to bear higher prices. What happened next should be a mystery. Yet the plan to fix it is either debt forgiveness (not a solution per se) or more loans.
The failure to see the pattern is a failure of the US higher edu system. The irony funny. Sad but funny.
2 replies →
Can we just flip "money" into "debt" altogether already? It's not like most people have any money to begin with and now they want to make it even harder to ever have anything.
Boris is doing this so he can delay the collapse of the economy btw.
Money is already transferable debt. Someone does something for you, you owe them a debt. You give them money. Money is that debt made transferable.
A smart government would incentivise the population to invest in British industry, which would develop the economy and reduce this ridiculous industrial-investment-killing monster in the shape of the property market. But, this is England: a place where good ideas that might benefit the masses are generally either strangled at birth or sold off for a pittance.
A nation of shopkeepers has become a nation of buy to let parasites.
Something like that. It really is tragic. Our 'leaders' seem to have no ideas beyond a relentlessly expanding, relentlessly interfering state.
Not that far away from permanent rentals owned by the state, where you gain whatever equity is added while you temporarily control it. Then you pass the rental off to the next person. Your max monthly payment is a calculation based on your income which declares the highest rental you can afford.
People pay for housing for what they can afford on a monthly basis. The government should stop making debt so cheap and housing would go down in cost.
This is a smart move.
House prices are mostly determined by how much leverage people can get to buy them. Look for example at unmortgageable houses (eg. due to construction type or land covenant), and they are around 5x cheaper for a similar living space.
House prices must continue to rise, or the debt-tower collapses, and everyone ends up penniless. Some people say thats what they want, but a real uncontrolled housing collapse would be far worse than 2008, and would likely end in a multi-generational economic downturn.
Successive governments have taken lots of moves to maintain high prices - "help to buy" ISA's, shared ownership, small downpayment mortgages, 'affordable' housing, etc.
Those things are also very politically convenient because to the layperson they seem like ways to make housing more affordable, when in fact the market result is house prices rise further.
Will there ever be an end to the rises? Maybe not... Inflation in the British Pound has gone on for hundreds of years. House price inflation can do the same. Will they continue to rise faster than inflation? Maybe... If you can construct more and more elaborate ways to get higher leverage. There are lots of options left, like for example the government could back mortgages with interest rates below market rate.
I tend to disagree. If anything, it would make everything more expensive and at the same time more unstable.
The school of thought that I subscribe to in economy is that everything is priced in. Relaxing the terms of lending increases risk, drives up the price of said mortages und amplyfies the fallout in times of market turmoil.
Edit: Reread your comment, we are in fact in agreement.
> This is a smart move.
> House prices must continue to rise, or the debt-tower collapses, and everyone ends up penniless.
It's not a smart move. Price cannot and do not trend in one direction forever. This is natural force to discover market clearing prices and thus efficient resource allocation. The only difference is how bad the pullbacks are.
Just ask any central bank which has lost a battle against the free markets (which is all of them). It's much more costly.
It’s not a smart move. Doesn’t really address the real issue.
Young folks in the U.K. already have it hard enough. Nothing is going their way.
I see other in this thread maintaining that this sort of thing is normal. Well I think they’ve been conditioned to think it’s normal. To me it’s not normal to pass on debt to children. We’d all prefer to pass on wealth to our children.
U.K. need to address the issue of supply. They also need to address the issue of individuals building up so called property empires. Our whole perspective around housing in U.K. has to change. It’s an utter mess.
He’s trying to prop asset prices up for current homeowners who are outraged at what interest rate rises are doing to the “earnings” they made from their home over the last few years. We’ve gone from a world where people’s homes made more than they did to a world where people’s homes are losing value faster than they can save. Of course a politician wants to stop the bleeding.
An unhealthy percentage of Europes GDP is in real estate. If realestate collapses then so will the European economy
No we haven't. House prices are still rising, although slowing down a bit. There's no bleeding or outrage at this time.
I agree he certainly is trying to prop up those prices though.
Housing isn’t actually down yet, but further rate hikes could lead to that.
I don't undersand what changes (besides the duration of the mortgage) I have no idea how the UK laws work, but in Italy the mortgage repayment is passed on to heirs, it is a debt like any other one.
It is a common enough scenario when someone dies prematurely even with "usual" 15-20-25 years mortgages.
'forever' mortgages (ie. interest-only) already exist. They just aren't commonly used in the UK.
They’re not as popular now as interest rates are low enough to make a repayment mortgage affordable to most. Coupled with their association with the Endowment Mortgage scandal [1] they’re not that popular in the UK anymore except as an equity release option.
[1] http://www.bbc.co.uk/news/business-20858236
I guess that is only the case if the inheritors are willing to keep the property. Usually, in most countries, debt is settled with the deceased estate, not with their descendants.
>Usually, in most countries, debt is settled with the deceased estate, not with their descendants.
I am not sure to understand, maybe Italy is the outlier, here after someone dies, the heirs (either determined by the Law or nominated in a will) either accept or refuse the inheritance "as a whole", and the inheritance is composed of credits (like money in the bank, estate/houses, other properties, etc.) and debts (including mortgages, debts or loans taken from privates, past unpaid taxes and similar, etc.).
In most cases there is not (anymore) a mortgage on the houses, but if there is, all obligations are part of the inheritance and are passed on to the heirs (if they accept the inheritance).
There are "special" life insurance policies that cover the residual mortgage repayments in case of death, and while many (I believe most if not all) banks will require one of these they are not mandated by Law, so it may happen that the morthage debt is transferred to the new proprietor(s) of the estate, i.e. the nominated heir(s).
I don't know Italy laws, but everywhere that I'm familiar with, debt doesn't automatically pass to heirs. The heirs can always choose to not take the house, and thus not take the debt either. The house will be sold to pay the debt, if it's insufficient then the lender loses out.
Yes, that is exactly like it works in Italy, the inheritance is made of credits/assets+debts, the heir(s) can (should) evaluate the + and the - and then have the option to either accept or refuse the inheritance as a whole (the good and the bad together).
It is not common that heirs refuse an inheritance as usually the overall balance is positive, but it can happen, in these cases (like the case where there are no known heirs) the whole inheritance goes to the state, that proceeds - as you said - to liquidate the property and repay - in whole or partially - the debts.
usury rampant
you will own nothing, and you'll like it
The meek shall inherit the earth, but not its mineral rights
My favorite quote
In Sweden you can get an 100-year mortgage (pretty much interest-only), it used to be common for people buying for just a year or two and then selling at a higher price.
You can only fix the interest rate for 3-10 years at a time though.
That's.. interesting - seems kind of like packaging up 'renting + levered bet on housing market', it's not obvious to me why the ordinary person would want that, or the state see fit to let them?
It's the banks, not the state.
But it's partly due to the Bostadsrätt system where you own like the right to an apartment in a co-op rather than the actual physical building.
Renting in Sweden is completely terrible (unless you're lucky enough to get a first hand contract - mandatory rent-controlled rents), so it's nice to have a middle-ground where you don't need a lawyer, etc. and deal with building issues and property tax, at the cost of paying the board maintenance. This has also helped to control prices a little (until COVID) by preventing absentee landlordism being profitable (or even possible in most cases).
The first hand contract system really sucks though, as it means you're always kind of subsidising those lucky enough to get a first hand contract. For example you might be paying 40% income tax (and 25% sales tax, and then your mortgage) which is then used to bring in unskilled, uncooperative criminal "asylum seekers", which the government then provides a subsidised first-hand contract to in your neighbourhood so they can commit crimes in your area - and you've paid for all of it!
1 reply →
Probably not fixed rate.
Every country hates on its poor in different ways: in the USA it’s the lack of healthcare, in the Uk the lack of long term fixed rate mortgages.
The US also has a severe housing affordability crisis :-)
Looks like it’s going to tank…
Canada does not have long-term fixed rate mortgages either.
Nor does Australia, 5 years max usually and the interest rates are fairly punitive.
Seems like a way for rich to avoid inheritance tax.