A Future Crisis: Retired and Paying a Mortgage

ruserious

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It is now virtually impossible for people in their 20s to get a mortgage.

The average salary for graduates in their mid 20s is €28K. Under current mortgage lending caps (3.5 times salary), this means that a bank can only give a maximum of €98,000 in a mortgage to an average single young earner starting out. Even when you add the deposit, there are not many places for young people to buy at that level.

To make a mortgage even possible, young couples will now more than likely have to go in together in order to meet the salary cap. Before, the problem was making up a deposit. But the 3.5 times salary cap means that it is virtually impossible for single or young people to get a mortgage on their own.

Most (sensible) people would not want to make such a big financial commitment with another person unless they were married. The average age for men now marrying in Ireland is 35.
https://www.joe.ie/news/getting-married-ireland-585036

If the average 35 year old (now finally married and mortgage ready) takes out the standard 35 year mortgage with a partner, he will be 70 by the time the mortgage will be paid off.

Already this year, we heard how public servants can work until they are 70. I am beginning to understand why. If people are forced out of the labour market at 65/66, they will face severe financial trouble paying off the remaining few years of their mortgage.

We, as a society, are kicking mortgage repayments into our later years. I believe that the banks and government should do more to make it attractive again for young people to take out mortgages and be able to enjoy life more in their later years.
 


Morgellons

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I think they pass mortgages down from parents to children in places like Germany and Holland. That will probably start here too.
 

paulp

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It is now virtually impossible for people in their 20s to get a mortgage.

The average salary for graduates in their mid 20s is €28K. Under current mortgage lending caps (3.5 times salary), this means that a bank can only give a maximum of €98,000 in a mortgage to an average single young earner starting out. Even when you add the deposit, there are not many places for young people to buy at that level.

To make a mortgage even possible, young couples will now more than likely have to go in together in order to meet the salary cap. Before, the problem was making up a deposit. But the 3.5 times salary cap means that it is virtually impossible for single or young people to get a mortgage on their own.

Most (sensible) people would not want to make such a big financial commitment with another person unless they were married. The average age for men now marrying in Ireland is 35.
https://www.joe.ie/news/getting-married-ireland-585036

If the average 35 year old (now finally married and mortgage ready) takes out the standard 35 year mortgage with a partner, he will be 70 by the time the mortgage will be paid off.

Already this year, we heard how public servants can work until they are 70. I am beginning to understand why. If people are forced out of the labour market at 65/66, they will face severe financial trouble paying off the remaining few years of their mortgage.

We, as a society, are kicking mortgage repayments into our later years. I believe that the banks and government should do more to make it attractive again for young people to take out mortgages and be able to enjoy life more in their later years.
It's not pretty I know, however,
With a 35 year mortgage, the real terms amount to be paid in the last 5 years should be small given inflation. Paying a 1,000 a month today maybe big. In 2048, 1,000 would not be a big amount one would imagine.
 

Jack Walsh

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Something very immoral about that.
Why?

3 children get a 500k house with a 200k mortgage?
What is wrong with that?
They can sell it and trouser 100k each.

This almost uniquely Irish practise that a big FO house or property mortgage free is an automatic entitlement for your children after you die is far more immoral.

Let people live their lives in old age and stop skrimping, just to be able provide huge lump sums for children who you have worked your ass off for 30 years plus to provide for, care, educate and protect.
 
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Morgellons

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Something very immoral about that.
Isn't that the same with government borrowing, passing debt down to future generations?

Usury-it's not a sin for nothing, you know!
 

NYCKY

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It is now virtually impossible for people in their 20s to get a mortgage.

The average salary for graduates in their mid 20s is €28K. Under current mortgage lending caps (3.5 times salary), this means that a bank can only give a maximum of €98,000 in a mortgage to an average single young earner starting out. Even when you add the deposit, there are not many places for young people to buy at that level.

To make a mortgage even possible, young couples will now more than likely have to go in together in order to meet the salary cap. Before, the problem was making up a deposit. But the 3.5 times salary cap means that it is virtually impossible for single or young people to get a mortgage on their own.

Most (sensible) people would not want to make such a big financial commitment with another person unless they were married. The average age for men now marrying in Ireland is 35.
https://www.joe.ie/news/getting-married-ireland-585036

If the average 35 year old (now finally married and mortgage ready) takes out the standard 35 year mortgage with a partner, he will be 70 by the time the mortgage will be paid off.

Already this year, we heard how public servants can work until they are 70. I am beginning to understand why. If people are forced out of the labour market at 65/66, they will face severe financial trouble paying off the remaining few years of their mortgage.

We, as a society, are kicking mortgage repayments into our later years. I believe that the banks and government should do more to make it attractive again for young people to take out mortgages and be able to enjoy life more in their later years.
Do you think that the average graduate starting out should buy a house? They haven't established any kind of consistent employment history and probably little of a credit history.

The banks are right to cap the mortgage on a times salary basis. We all saw what happened when they didn't.
 

Casablanca

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A number of factors play into this in addition to those cited by the OP.

1. A feature of greater access to 3rd level education and post-Leaving Cert Courses is that young people enter the jobs market later. Whereas I started working at 18 and had achieved a good salary by 25, many people still haven’t started work at 25 now

2. That later starting age and the need to pay a mortgage and pension means future generations will work up to 70, although that may be influenced by technology and the ability of the State to provide a ‘living wage’ as well.

3. We will live longer meaning that even if we work til 70, we will have 15-20 years retirement, whereas working to 65 in the past meant 7-10 years retirement.

All these things play into a rather depressing vista. I’d hate to be starting out again, and those that are have my sympathy.
 
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NYCKY

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It's not pretty I know, however,
With a 35 year mortgage, the real terms amount to be paid in the last 5 years should be small given inflation. Paying a 1,000 a month today maybe big. In 2048, 1,000 would not be a big amount one would imagine.
Inflation over 30 years helps a lot of people pay their mortgages.
 

Niall996

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Because children will become anchored by the decisions of their parents. It limits freedom of the individual.
Children inherit the house anyway. The only difference is there may still be a small mortgage outstanding.
 

ruserious

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Do you think that the average graduate starting out should buy a house? They haven't established any kind of consistent employment history and probably little of a credit history.

The banks are right to cap the mortgage on a times salary basis. We all saw what happened when they didn't.
I'm earning in the low to mid €30Ks aged mid to late 20s. I want to get on the property ladder instead of paying rent in Dublin. I have the deposit ready but the salary cap is killing me. I've been working full time almost 4 years. 30 years ago, someone in the same position as I (public servant) would easily get a mortgage. Now it is rent (dead money), mammy, or marry early (risking fall out and subsequent defaults).

If a young person has a steady income level and proven saver, I don't see why the Central Bank can't allow banks flexibility with the salary cap. I mean we are trying to prevent young people graduating onto housing lists aren't we?
 

ruserious

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Children inherit the house anyway. The only difference is there may still be a small mortgage outstanding.
What if a child refuses to pay. What legal responsibility would a child have for a mortgage signed before they were born?
 

gerhard dengler

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It's not pretty I know, however,
With a 35 year mortgage, the real terms amount to be paid in the last 5 years should be small given inflation. Paying a 1,000 a month today maybe big. In 2048, 1,000 would not be a big amount one would imagine.
Is 35 year mortgage standard?

Back in the day, 20 year mortgage was what people went for - get it repaid asap.
 

gleeful

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By the time I retire (probably at 85) inflation will have made my repayments cheap enough to pay on the state pension
 

Sync

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It is now virtually impossible for people in their 20s to get a mortgage.

The average salary for graduates in their mid 20s is €28K. Under current mortgage lending caps (3.5 times salary), this means that a bank can only give a maximum of €98,000 in a mortgage to an average single young earner starting out. Even when you add the deposit, there are not many places for young people to buy at that level.
That's not actually true though is it? The average starting salary for a graduate is 28400.

The average graduate starting salary is now

I'm just shocked that people new to the job market have to save for a deposit. Sher gone are the days when you could buy a 4 bed when you were 24.

Most (sensible) people would not want to make such a big financial commitment with another person unless they were married. The average age for men now marrying in Ireland is 35.
https://www.joe.ie/news/getting-married-ireland-585036
You mean adults should financially plan for the future? Yes. Yes they should. Marriage is part of that planning. There are advantages to marrying early. There are advantages to marrying late.

If the average 35 year old (now finally married and mortgage ready) takes out the standard 35 year mortgage with a partner, he will be 70 by the time the mortgage will be paid off.

Already this year, we heard how public servants can work until they are 70. I am beginning to understand why. If people are forced out of the labour market at 65/66, they will face severe financial trouble paying off the remaining few years of their mortgage.
1. We've got far bigger problems with an aging population than them having to manage the loan they've voluntarily entered into.
2. You've provided no data or analysis as to why this would actually become a problem. Your salary at 35 is more likely to increase than decrease, making the loan easier to manage
3. If you're 35 now, (again, assuming you're financially planning), your standard assumption should be that the retirement age is going to be at least 70 by the time you approach 50.
4. 35 years isn't standard

We, as a society, are kicking mortgage repayments into our later years. I believe that the banks and government should do more to make it attractive again for young people to take out mortgages and be able to enjoy life more in their later years.
:roll: What do you think the banks should do exactly? And why should they? Is there a surplus of houses in the country? Low demand that's impacting the economy?
 

Mushroom

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Because children will become anchored by the decisions of their parents. It limits freedom of the individual.
That's true only if the kids are legally obliged to take on the mortgage, which seems hard to believe. If they have the right to refuse a negative equity "inheritance" then all is well.
 

Lumpy Talbot

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No
I think I may have a solution to the issue of an ageing population and paying for the 'pinshin' and top-ups for various thinly disguised criminals in the charity and public sector.

Introduce the notion that they should have saved up and not relied on extracting the lump sum on the taxpayer, 'top-ups' and manage the expectation that they be cushioned against cost by their neighbours by simply letting them die.

Natural wastage is a concept used in business to describe the lowering of employee related costs over time.

If a charity chief has earned a decent salary for decades and complains that they need a top-up then they should be told exactly the same thing as anyone looking for a hand out which they haven't earned.

'No'.
 

Mushroom

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I think I may have a solution to the issue of an ageing population and paying for the 'pinshin' and top-ups for various thinly disguised criminals in the charity and public sector.

Introduce the notion that they should have saved up and not relied on extracting the lump sum on the taxpayer, 'top-ups' and manage the expectation that they be cushioned against cost by their neighbours by simply letting them die.

Natural wastage is a concept used in business to describe the lowering of employee related costs over time.

If a charity chief has earned a decent salary for decades and complains that they need a top-up then they should be told exactly the same thing as anyone looking for a hand out which they haven't earned.

'No'.

Have you ever noticed the way that the seats on either side of you in the office canteen frequently become empty almost as soon as you have sat down?
 

cabledude

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What if a child refuses to pay. What legal responsibility would a child have for a mortgage signed before they were born?
Sell house, clear mortgage and let them make their own way.
 


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