Housing unaffordable

I have written about it before and today I do it again. Housing has gone 5X in price in the last 25 years, but wages have only risen with 75 % since then. So you don’t have to be a rocket scientist to calculate that housing has become a lot more expensive. And not just in rural areas but all over Belgium.
For most of the young couples it has become unaffordable to buy a house or apartment.

Marketing

So, the building sector, housing sector and the banks started with a marketing plan to keep the market up.
They introduced the 40 year mortgage. Up until today most of the mortgages are on 20 to 25 years. Exceptionally 30 years.

The marketing behind the 40 year mortgage is very ingenious. “Housing has become affordable again!” But what they don’t tell you is that you first of all get a higher interest rate than on 25 years. Sometimes up to 1 % higher. And they definitely don’t tell you the fact you pay a lot more interest over such a longer period of time. At current interest rates you pay your house two times!

It is all marketing and nothing structural is done to the shortage on the housing market. To the contrary, the banks earn a lot more in one contract, so they are actually the big winners. Not the customers!

What’s next? 100 year mortgages like in Japan?

Sincerely,

Pele23

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