[bediger4000]

The author's point is that a 50-year mortgage is a bad deal because almost nobody has a 50-year working lifetime to pay for it, and besides the interest over that time span is absurd.

But let's think instead of who a 50-year mortgage is bad for: someone who can't quite currently afford a house. Who is a 50-year mortgage good for (bearing in mind this is a UK thing): anyone in the business of lending.

It's a done deal that these will become a commonly done way to buy a house.

[chadash]

I don’t think this is quite right. If the interest rates are low enough, even the most financially savvy people will take this deal. For example, I have a friend who can easily afford to pay cash on a $1 million house, but he has a 30 year mortgage. Why? Because his mortgage rate is 2.5%. He can take his money and put it into Stocks or other investments and get a much better return than 2.5%. If he were truly risk-averse, he can even put the money in long term treasuries and make more than 2.5. At low enough rates, it always pays to have a loan. It’s (almost) free money.

Edit: at current interest rates this advice makes less sense, but even so, it could pay in some situations. For example maybe your mortgage is 4.5% but your student loans are 7.5%. Take the mortgage and pay down those loans. Obviously too much debt is bad, but not all debt.

[psychphysic]

It begs the question why don't banks do that instead of lending it?

Well because the bank never had the money they lent you. Central banks let retail banks invent money for the loans[0]. Then incentives then to meet some thresholds on "affordability tests". If they do that loan doesn't use up as much liquidity as it's face value.

The net effect? You pay your bank interest on money that cost (used bank resources) less that the face value.

[0] https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

[missedthecue]

This is a common misunderstanding of banking. They don't invent money.

The money supply "increases" when banks lend because of the double entry accounting system. They give you a loan, you can deposit the money in a bank account, and they have more deposits to loan out. It's literally just lending the same dollar twice, not inventing or creating money. (Well... somewhat less than $2 because of reserve requirements).

That's not inventing money.

[nyokodo]

> That's not inventing money.

Since the same money can be spent by the borrower and the saver separately and go off into circulation separately then it is creating new money.

[psychphysic]

It's worth checking out the link I provided to the Bank of England's document on modern banking and "loans make deposits", as opposed to your outdated view that "deposits make loans".

Fractional reserve banking is not how modern banking works. Banks must maintain a liquidity but otherwise the loans are money they made up, they simply tell the central bank they made a loan.

[missedthecue]

Money is fungible. Functionally, the result is the same. A bank cannot lend out more than the amount of assets (deposits) that it has on the books.

[psychphysic]

That's categorically untrue. But understanding why would require reading the article I linked earlier.

[anamax]

> You pay your bank interest on money that cost (used bank resources) less that the face value.

[0] Every sustainable business sells for more than it pays.

[1] Central banks won't make that money available directly to me.

[UncleEntity]

It depends.

Nobody says you have to make the minimum payment every month and you’re buying with today’s dollars, err…pounds, but paying with future less valuable money. Pay a little extra in the good times but have a lower minimum payment for when money gets a little tight.

[rogerkirkness]

These or even longer ones are common in various places.