More than a million mortgages have been issued in the past three years which home-buyers are set to still be repaying into pension age.
The latest data shows that two in five new mortgages have terms that see homeowners still making payments in retirement.
Ultra-long, or extended, mortgages have become more popular during a time of higher interest rates as people aim to spread the cost.
But this will ultimately make the loan more expensive, and experts say it raises serious questions over financial planning for retirement.
At the end of 2021, about three in 10 mortgages took repayments into pension age, according to Bank of England figures obtained by the pension consultancy LCP.
That proportion grew as interest rates rose. Despite interest rates having fallen from their peak, LCP said the trend appeared to have continued.
“There is increasing evidence that taking out a mortgage which runs past pension age is an entrenched feature of the mortgage market rather than a temporary blip," said Steve Webb, a former pensions minister who is now a partner at LCP.
"This has profound implications for retirement planning, as it is likely to mean that savers may end up using already inadequate pension pots to clear a mortgage balance."
The temptation for young homeowners is obvious. A longer mortgage term would reduce monthly repayments.
But with the average age of first-time buyers rising - it now stands at nearly 34 - the question of how people will be able to afford mortgage payments when they hope to retire becomes increasingly important.
UK Finance, the banking and lenders' trade body, said only 3% of mortgage-holders were currently paying off a mortgage after the age of 65.
While many young homeowners have chosen longer mortgage terms to make repayments more manageable, they may opt for shorter terms in the future if their salaries improve or they move house.
That is why UK Finance expects only a small fraction of the mortgages taken out now to ultimately go into borrowers' retirement years.
However, it does also raise the prospect of some people having to work longer until a mortgage is paid off, or they may choose to downsize.
Lenders set limits
Lenders are relatively flexible on allowing people to take out these longer-term mortgages, but there are constraints, according to David Hollingworth, from mortgage broker L&C.
"There will often still be maximum age limits at the end of the mortgage term and lenders will need to be sure that the borrowing will be affordable," he said.
"That will require borrowers to show that their post-retirement income is adequate."
Affordability checks became stricter after the financial crisis of nearly 20 years ago, with lenders needing proof that mortgage applicants could cope with rising interest rates.
The reality for many people is that getting any kind of mortgage remains unaffordable.
Data published earlier in the week shows the dynamics of renting and owning, and their effect on financial strains and life satisfaction.
"The proportion of people renting privately doubled during the 2000s, and while it has levelled off at around a fifth of households, or a third in London, we’re seeing people renting later in life," said Sarah Coles, from investment platform Hargreaves Lansdown.
"Even when people reach their late 50s and early 60s, 11% are still in private rentals."
The following article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.
Commercial real estate continues to suffer despite the Federal Reserve’s attempt at ameliorating the capital markets with a 50-basis point rate cut in September.
The pain is especially apparent in the so-called “CRE-CLO” bond market. CRE-CLO bonds are packaged commercial real estate mortgages comprising short-term floating rate loans. These bridge loans were recently, and most notably, used to facilitate the biggest apartment investment bubble in history, but were also used in financing other commercial real estate sectors including office, retail, hotel, industrial, and self-storage.
Most of the current batch of bridge loans originated in the 2020-2022 period—when benchmark rates were near zero and commercial real estate prices were peaking—and carried maturities of three to five years. Benchmark rates are now much higher, prices much lower, and property performance far worse than anticipated. Thus, a wall of maturities is staring borrowers, lenders, and bondholders in the face, all while underlying property performance disappoints.
Despite attempts by lenders to extend and pretend—kicking the can down the road in the short term to avoid defaults until the Federal Reserve lowers rates enough to bail them out—their delusions of reprieve may be fading fast.
Apartment Investors Play Checkers Instead of Chess
At the end of Q3, the distress rate for CRE-CLO loans across all commercial real estate sectors reached 13.1 percent, an all-time high. Distress in this instance is defined as any loan reported 30 days or more delinquent, past the maturity date, in special servicing (typically due to a drop in occupancy or a failure to meet certain performance criteria), or any combination thereof.
Figure 1
While roughly one in seven loans meets these criteria, the weakness is concentrated in two or three sectors.
Unsurprisingly, office properties have the highest rate of distress, with nearly one in five CRE-CLO office loans experiencing current distress. This is to be expected after the covid panic of 2020, subsequent to which various “work-from-home” directives essentially made the office market obsolete.
For similar reasons, distress is also high in the retail segment, as all but the most well-heeled retailers were forced under by the maniacal and criminal government edicts of the time.
However, the real story here is in the apartment, or multifamily, sector. Seen in Figure 1, the distress rate for apartments touched 16.4 percent in August. An astonishing number, indicating that one in six apartment bridge loans were distressed. The improvement to 13.7 percent shown for September is seasonal, as renters settle in at the start of the school year.
While this picture is bad enough, the reality under the surface is far worse. As reported by the Wall Street Journal, using Q2 data from MSCI, the batch of currently distressed apartment bridge loans comprise roughly $14 billion in total loans, but there exists an additional $81 billion in potentially distressed loans. MSCI categorizes loans as “potentially distressed” if they have seen delinquent payments, forbearance (when the lender lets interest payments accrue rather than taking a default action), or where key performance metrics like occupancy and net operating income are dangerously low.
Figure 2
The arithmetically-aware will note that if the $14 billion of currently distressed apartment bridge loans comprise a roughly 14 percent distress rate at the end of Q2 (as shown in Figure 1) and there are an additional $81 billion in potentially distressed loans not yet categorized as “currently distressed” (as shown in Figure 2), then MSCI data implies that 95 percent of all apartment bridge loans are either currently distressed or in imminent danger of distress.
While astounding, this level of distress will come as no surprise to veterans of the apartment market. In the 2020-22 period, bridge loans of this variety were ubiquitous above a certain minimum loan size. And, because of the extreme and reckless nature of money printing undertaken by the Federal Reserve during this time—when interest rates were effectively zero—lenders underwrote property acquisitions with a 1.0x debt service coverage ratio (“DSCR”), meaning the initial net operating income of the property was projected to just cover interest payments, with nothing left over.
Bridge loan interest rates floated at a spread (typically around 350 basis points, or 3.5 percent) to the Secured Overnight Financing Rate (“SOFR”), which was essentially 0 percent until mid-2022. Because of the 1.0x DSCR standard, a property acquired during this period that had net operating income of $1 million would have also had interest payments of $1 million at the then-prevailing interest rate of 3.5 percent.
SOFR is now 4.9 percent, indicating a total interest rate of 8.4 percent (SOFR + 3.5 percent spread). This same property now has interest payments of $2.4 million while net operating income is unlikely to have increased to any significant extent, if at all. Insurance and property tax increases in particular have damaged apartment profitability while rent increases have been difficult to execute in the face of stagnating real wages. By the same token, absurdly optimistic renovation plans have been impossible in the face of cash flows increasingly shunted towards paying interest.
The Amazing Disappearing Rate Cut
The high amount of potential distress in CRE-CLO bonds, and the loans that underlie them, indicate an expectation on the part of lenders that help is coming in the form of lower interest rates. After all, capital markets have become used to being bailed out by the Federal Reserve, all but demanding that the taxpayer—not they—be held responsible for their poor decisions. Nevertheless, the Fed’s recent rate cut is proving not to be the magic bullet on which lenders relied.
By August of this year, futures markets had fully priced in a 25-50 basis point Fed rate cut in September, and were expecting additional 25 basis point cuts in November and December. This expectation for the Fed Funds Rate carried over into Treasury yields, a key benchmark for the commercial real estate industry. Particularly important in the case of distressed bridge loans since any hopes of refinancing are placed not on more bridge loans—which are now much less pervasive—but on the fixed-rate agency market comprising Fannie- and Freddie-backed apartment loans, which prices loans off a spread to treasuries.
At the beginning of August, as markets priced in 75-100 bps of Fed rate cuts by year-end, 10-year Treasury yields reacted accordingly, dropping from 4.30 percent in late July (they had been 4.70 percent in April) to 3.65 percent in the middle of September. As of early November, most of that move had been erased—with yields back near 4.30 percent—roughly where they were prior to market pricing in this year’s Fed rate cuts.
Fear and Trembling
Undeniably, participants in the commercial real estate market—apartment bridge lenders in particular—are relying on loose monetary policy for their immediate salvation. They may get their wish. While Treasury rates have moved stubbornly higher, market forces only mean so much if the Fed decides to supplement rate cuts with purchases of treasuries, driving yields lower—another round of quantitative easing.
Nevertheless, to the extent they’re allowed to be heard, market signals are unmistakable. A regime that can’t stop spending and continues to appropriate the property of its citizens through inflation will provide upward pressure on Treasury yields, all else equal. In a free market context, the rent-seekers that comprise the commercial real estate market will have to work out their own salvation.
After the horrific hurricane damage that destroyed or damaged as many as 100,000 homes in Western North Carolina, one would think FEMA and local officials would move heaven and earth to get those affected out of flimsy tents and trailers and into solid dwellings as winter inexorably descends.One would think wrongly:
Graphic: Matt von Swol. Used with permission.
WNC resident (and X user) Margo reported last month that her area had "56 passenger bus load groups of skilled Amish carpenters coming down from Lancaster PA weekly to help build tiny homes for Cabins for Christ." Margo was doing her bit, looking for help finding room to lodge all of the volunteers. "We are bringing our own supplies and would be 100% self-sufficient," she posted, "Just need a place under [a] roof to sleep and house our volunteers from Monday night through Friday night every week."
That’s the kind of selflessness Americans have always revered. How many tiny homes have they built?
Teamed up with Cabins 4 Christ, the Amish volunteers have been working five-day shifts before swapping out for the next team of volunteers. Nobody seems to know how many tiny homes have been built. But I used my paid research assistant, ChatGPT, to do some investigating for me. For whatever it's worth, ChatGPT claims that "In disaster relief efforts, such as the recent North Carolina project, Amish carpenters often build small cabins in as little as 5 days."
If a small team can build a home each week, and there are hundreds of volunteers working for almost four weeks, they must have built more than a hundred quality cottages by now. All on their own dime. If you know anything about Amish carpentry, you might safely assume those little cottages are well-built.
So that sort of kindness, generocity and help must be welcomed, right? Right?
Of course not. There’s no indication the work of the Amish is dangerous, that it would in any way harm public health or safety. The Amish live simply, without all the gadgets and conveniences upon which most Americans rely, but they know how to build solid, warm shelter. After all, they live in Pennsylvania where they deal with cold every year. Shouldn’t local bureaucrats make whatever exceptions are necessary, even if only temporarily? FEMA is surely not taking up the slack, and though Donald Trump will likely turn his attention to that red taped agency, that’s going to take time, and winter is nearly upon us.
But the bureaucratic mindset, as explained by the invaluable Thomas Sowell, dominates even there, even now:
“You will never understand bureaucracies until you understand that for bureaucrats procedure is everything and outcomes are nothing."
And so it goes as Joe Biden fades to transparency and his handlers howl in outrage and plot Trump’s, and America’s, destruction.
Mike McDaniel is a USAF veteran, classically trained musician, Japanese and European fencer, life-long athlete, firearm instructor, retired police officer and high school and college English teacher. He is a published author and blogger. His home blog isStately McDaniel Manor.
After existing home sales unexpectedly ticked up in October, analysts expected new home sales to slow after their recent resurgence (-1.8% MoM). They were right... BUT... the magnitude is mind-boggling!
New Home Sales collapsed 17.3% MoM in October. That is the largest MoM drop since July 2013
Source: Bloomberg
That MoM plunge dragged sales down 9.4% YoY to 610k SAAR - the lowest since Nov 2022
Source: Bloomberg
Of course, all the revisions are lower...
Hurricanes Helene and Milton, which tore through parts of the Southeast, delayed sales in the nation’s biggest housing region and dragged down sales overall.
Sales in the South decreased 28% to 339,000, the slowest pace since April 2020. Sales also fell in the West, but rose in the Northeast and the Midwest.
Source: Bloomberg
Finally, we note that the median sale price of a new home increased to $437,300 in October, the highest in 14 months.
Does this mean November's data will see a massive surge in new home sales? ...even as rates have increased significantly?
New York is set to shutter 12 migrant shelters before the end of the year, marking a significant shift in its response to the city’s ongoing migrant crisis.The closures, announced just weeks before President-elect Donald Trump takes office for a second term,highlight the strain on resources and the political tensions surrounding immigration policies.
As Mike Shedlock of MishTalk.comnoted in June, 20% of NYC hotels have become migrant shelters, driving up the cost of hotel rooms elsewhere for paying customers.
Two hotel-based shelters, the Hotel Merit in Manhattan and the Quality Inn JFK in Queens, have already been closed. An additional 10 facilities across the state - including in Albany, Dutchess, Erie, Orange, and Westchester counties - will cease operations by December 31, according to New York City Mayor Eric Adams’ office. The sprawling Randall’s Island shelter, which was designed to accommodate up to 3,000 migrants, is slated to close by February 2025, shortly after Trump’s inauguration.
A Crisis of Scale and Cost
Since the spring of 2022, more than 223,000 migrants and asylum seekers have arrived in New York City - roughly half the population of Albany. The city has struggled to house and support this influx, operating 210 city-run shelter sites across the five boroughs. Currently, 58,000 migrants remain in taxpayer-funded shelters, costing the city an estimated $352 per migrant per night. Only $130 of that amount goes directly to housing costs, with the rest allocated to social services, food, and cleaning.
The NYPD has spent $21 million on public safetyand security related to the migrants.
The eye-popping figures, listed on the city’s online asylum-seeker funding tracker, shows the city overall spent $4.88 billion combined through fiscal years 2023 and ‘24. Based on the rate of spending, the city likely exceeded more than $112 million since the start of the new fiscal year beginning July 1, or will soon, cracking $5 billion.
Mayor Eric Adams’ administration has even projected the cost could double, hitting $10 billion over the three year period ending June 30, 2025. -NY Post
Without policy changes, the crisis is projected to cost New York taxpayers $12 billion over the next three fiscal years, according to city estimates. Mayor Adams praised efforts to consolidate shelter operations and reduce costs, noting a 19-week decline in the migrant census.
"Over the past two years, our teams have accomplished the Herculean task of providing compassionate care for a population twice the size of Albany and saving taxpayers billions of dollars," Adams said. "The new policies we’re implementing today will build on our successes, save taxpayers millions, and help even more migrants take their next steps towards fulfilling their American Dream."
Meanwhile, an audit released in August found that NYC overpaid upstate hotels by millions of dollars for sheltering illegal immigrants.
Of the questionable payments, $2.5 million were for unauthorized security, medical, and social services, $1.7 million for vacant rooms, and $230,000 for inflated food bills, according to the audit.
In another example, a Newburgh hotel billed a total of $57,000 for hundreds of unoccupied rooms in early May, for which DocGo got an additional $40,000 in commissions.
Tensions Over Shelter Evictions
Despite efforts to ease the burden on the system, the city’s shelter eviction policies have sparked controversy. Families issued a second 60-day eviction notice are now allowed to stay in their assigned shelters if they need more time, a move Adams touted as cost-saving and beneficial for children’s schooling continuity.
However, adult migrants face stricter rules, with a policy permanently evicting them from city shelters after 30 days. The policy has drawn criticism from activist groups, including Jews For Racial & Economic Justice, which staged a protest at City Hall during a hearing on the issue.
"Immigrants are welcome here - Trumpian policy is not!" protesters chanted, accusing the city of violating its decades-old right-to-shelter rule, originally established to address homelessness. Activists called the eviction policy "cruel and destabilizing" before being removed from the chamber.
A Changing National Landscape
While the flow of migrants into New York has slowed, with fewer arrivals and a reported 101,790 encounters at the U.S.-Mexico border in September—the lowest since February 2021—concerns persist about potential surges before Trump’s border policies take effect. A caravan of 1,500 migrants in southern Mexico, near the Guatemala border, is reportedly attempting to cross before Trump’s inauguration.
Trump has pledged to implement strict immigration measures, including sealing the southern border, carrying out a large-scale deportation operation, and ending Biden administration parole programs and the CBP One app. South Dakota Governor Kristi Noem has been appointed as secretary of the Department of Homeland Security, with former ICE Director Tom Homan named "border czar."
As New York City consolidates its migrant operations, Adams has a tough road ahead. The closures signal a pivot in the city’s approach but also underscore the broader national debate on immigration policy.
While cities like Venice and Rome struggle with overtourism, Calabria’s beautiful towns and villages struggle to retain and attract new talent.jovannig – stock.adobe.com
“It’s a win-win: you get a fresh start and a helping hand, while local economies enjoy a much-needed boost,” said Wayne Mills of Seven Seas World Wide, which specializes in solutions for international movers.
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And while it’s hard to imagine anywhere in bustling, 21st century Ireland being hard up for people, the beautiful and very popular country isn’t the only desirable destination with an unloved corner doling out ducats to willing new residents, according to Mills.
Declining populations, talent drain and other issues have obscure regions in vacation faves like Italy, Greece and Spain rolling out the proverbial red carpet.
A narrow street between the old houses of Presicce, a picturesque village in the province of Lecce in Italy that’s looking for new residents.Giambattista – stock.adobe.com
Ireland
The country is offering up to approximately $87,000 in the form of cash grants to those willing to renovate and move into a vacant home on a string of scenic coastal islands, according to the expert.
“There are 30 coastal islands whose total population is only around 3,000 people,” Wayne said. “Ireland is looking to revitalize and future-proof these beautiful islands by attracting a newer, younger population.”
Flippers need not apply — you’ll have to live in the house for at least ten years.
“This program is for everyone, but it’s especially targeting remote workers and digital nomads,” Wayne explained. “The Irish government is pledging to improve transport links, internet coverage, and health services as part of an overall plan to invest in the islands’ future.”
“They’d love to attract remote workers to diversify the islands’ economies, so if you’re looking for a peaceful yet productive lifestyle, consider having Ireland’s breathtaking coastal views as your office backdrop,” he said.
How does life in a small village in the Swiss Alps sound? If you’re not already sold, one particular town is willing to shell out some serious dough to get you.Kavalenkava – stock.adobe.com
If you’re under the age of 45 and don’t mind the idea of life in a small town, the village of Albinen in the Swiss Alps wants you — and wants to pay you $23,000, plus $11,500 for every child that moves with you.
You’ll have to live there for at least a decade, and undergo the rigorous process of becoming a citizen. But what a payoff, right?
“Switzerland is routinely mentioned as one of the safest and happiest countries in the world,” said Wayne.
The Ponga region in Asturias, Spain, will pay thousands to new arrivals willing to settle into life in the rural area.jordi – stock.adobe.com
So it’s not Andalucia and there won’t be orange trees in your backyard, but none of those cities are offering $3,200 — plus that much again for each young child — for you to move there.
One town in northernmost Asturias, eager to settle families, is reportedly willing to pay, however.
“Ponga is the name of both a town and municipality in one of Spain’s most northern regions, Asturias,” Wayne said. “Ponga is a little off the beaten track for tourists, but its mountainous landscape is absolutely jaw-dropping. It’s the perfect place to live in tune with nature — and the region produces amazing wines!”
“Antikythera has only 45 permanent residents as of right now, so it’s a tranquil and close-knit community,” Wayne divulged. “They really want to attract young families to revitalize their island and bring back some youthful energy, so you’ll no doubt be extremely popular as soon as you arrive.”
Italy
Here’s another country where some destinations — like Venice and Rome — suffer from being loved too much, while other regions remain almost invisible.
Calabria falls squarely in the latter camp — and they are apparently offering $30,000 to anyone willing to live in certain small villages in the uncelebrated region, provided they can start a business or fill an essential job.
There are rules, however — you have to be younger than 40 and you have to move in 90 days after you’re accepted into the program.
“Calabria is on the southwestern tip of Italy, in one of the sunniest and quietest, most picturesque regions of Italy,” Wayne said. “This is the perfect chance to live the dreamy, small Italian village life.”
Meanwhile, in Puglia, the neighboring towns of Presicce and Acquarica will pay new residents as much as $30,000 to buy a house in either, as long. as long as they register their new pad as the primary residence. Got a baby? You’ll get a bonus of $1,080, Wayne shared.
And then there’s Sardinia, vacation paradise — yes, except for those parts of the island where towns are suffering from population loss. Move to one of them (anywhere with fewer than 3,000 residents), buy or renovate a house, and you’ll get $16,200 as a thank you. Just make sure to initiate the process to become a full-time Sardinian resident right away — it’s part of the deal.
“This program aims to attract young people to Sardinia’s charming towns, rejuvenate local life, and keep the Italian countryside thriving,” said Wayne. “Sardinia is one of the most beautiful parts of Italy, and being paid to live there is such an amazing deal, you’d be mad not to snap it up.”
Hard to believe, but there are reportedly plenty of places in Japan that would love new residents.Blanscape – stock.adobe.com
While it can be difficult to imagine standing in the middle of Tokyo, Japan is full of towns that are suffering from dramatic population loss. The country’s Regional Revitalization Program allows for grants of up to $31,000 to those willing to move to one of those towns, according to Wayne.
“A lot of young Japanese people don’t want to go through the hassle of trying to find a buyer when they inherit old family homes, so there are hundreds of traditional Japanese countryside houses offering amazing locations, space, and architecture that are just going to waste right now,” said the pro. “This is the perfect opportunity to snap up one of these amazing properties and start an amazing new adventure.”
Canada
Cool with the idea of settling in Saskatchewan? The Canadian government wants you — enough to offer $14,400 in tuition reimbursement to those who commit to studying in Canada for four years before permanently moving to one of the country’s least glamorous provinces, which Wayne said is in need of skilled professionals.
