"index linked" mortgages?

amandstu

is this a good idea?

You go to the bank and arrange a mortgage on a house with a present value of say 500 ,000.

After 20 years you succeed in paying back your loan -and the then value of the house is assessed by an agreed 3rd party at 1 million .
The bank then says ( and you accept) that some of that increase in value is real (not just down to inflation) and so the bank is entitled to a share (50%) of the "actual" "profit" - say 100,000 as an example.

On the other hand suppose the value of the house had stayed at 500,000 then the bank would accept that ,allowing for inflation a loss on the transaction had occurred over the 20 years and so the mortgage would be "fully paid" after ,say, 400,000 +interest had been paid.

Is this (or similar) a good idea as a banking model for taking the sting out of a risky housing market?

Nody

Seeing how housing tends to be following inflation in value growth if you look at a long enough time period I'm not sure what you're trying to achieve here. Why would the bank gamble on the future house price AND be dependent on when the person would sell it? Insurance company? Maybe. Bank? Never.

gaius c

I'd be all for non-recourse mortgages but would people be willing to pay the increased interest rates banks will need to cover their risk?