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Protection warning over 50-year loans

Proposals for 50-year mortgages been criticised by life companies.

They say savings on 50-year loans would be minimal as protection policies would be very expensive if available at all for such terms.

The concept was floated last week by Charcol, drawing comparisons with Japan where astronomical property prices led to mortgage terms of up to 100 years.

Norwich Union claims the savings from such a loan are minimal. It says level term cover of £100,000, for a 30-year-old couple is £10.40 a month over 25 years but over a 50year term, this rises to £55.40 a month. Critical-illness policies, in particular, would need reworking to reflect the likelihood of illness as opposed to possibility of illness.

Charcol senior technical manager Ray Boulger says: “There is nothing magic about 25 years. The shorter the term the better. But a longer-term repayment mortgage is a better alternative than an interest-only mortgage if it enables people to buy rather than rent.”

NU media relations manager Ian Beggs says: “The substantial cost of extra interest together with the extra costs of protection would result in minimal or no savings. We would have to look at what was included in the cover if mortgages over a long term became the norm and costs would increase.”

•Long-term loans, p17

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