Mortgages at 7 times salary for 40 years

[Jon277]

Hmm - all puiblic sector jobs - I doubt if any of them will get a pay rise equal to inflation.

[mc2fool]

I would expect the bank, unlike it seems the energy companies, to hedge their fixed rate exposure.

How? How can they hedge their entire loan book? For 40 years! Surely they would then have to pay more for their loans than anyone else. They cannot completely hedge the risk and remain competitive - exactly the problem energy companies had.

Gryff

Long term fixed rate mortgages have not only been available but have been the norm in some other countries for decades.

They certainly are (or at least , were) in the USA and France, both places I've lived and worked. Indeed, natives of both were gobsmacked when I told them the UK only had variable rate mortgages, which was the case at the time (some decades ago). "What, you mean you don't know how much you'll be paying for your mortgage next month, next year, next decade?!?"

AIUI mortgage lenders in those countries simply issue debt, in the form of corporate bonds, to match their mortgages (presumably plus a margin to allow for defaults).

"Longer mortgage deals are common in the United States, Denmark and France, where borrowers can lock in for up to 40 years.
:
In Denmark, fixed-rate deals that run for 30 years are common. Special mortgage banks act as an intermediary between borrowers and investors who fund the loans by buying bonds. Borrowers make principal and interest payments to mortgage banks, which transfer the amounts to investors, minus administration charges."

https://www.telegraph.co.uk/finance/per ... gages.html (paywall, but see viewtopic.php?p=450068#p450068)

I don't see what structural issue exists that would make the UK different from those countries where long term fixed rate mortgages have been the norm for ever.

[SteelCamel]

So presumably, in a dozen years time, when base rates are 10%+ and house prices crash, habito will be unable to fund its debts, will go bust and all these people will lose their "fixed" rate mortgages. Just at a time when variable rates are highest and house prices lowest, so they all lose their homes and go bankrupt.

I don't think that would be the case - the lender going bankrupt doesn't entitle them to early repayment or to unilaterally amend the contract. Mortgages are not payable on demand. The liquidators would have to sell the loans (presumably at a substantial discount) to another firm, but the borrowers would still keep paying on the same terms.

Energy companies are a different matter - they hadn't yet supplied the electricity/gas at the time of going bust. So they can (and usually must) stop supplying any more energy to their customers, but still can only charge the agreed price (and credit terms) for what they did supply. A mortgage lender provides the full loan on day 1, so there's nothing for them to stop.