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With house prices continuing to head upwards, mortgage lenders are getting more creative to attract struggling buyers. One method currently being used is expanding the availability of longer mortgage terms, well beyond the typical 25 years.

So does this new trend offer hope for first-time buyers? Or do longer mortgage terms simply stoke the house price inflation fire? Let’s take a look.

What is happening with house prices?

According to the latest stats from the Office for National Statistics (ONS), average house prices have risen by almost £30,000 over the past year. The average house price now stands at a colossal £270,000.

This means that buying the average house now costs more than eight times the UK’s average salary of £31,285. To further highlight the plight of budding first-time buyers, ONS figures also reveal that house price growth has significantly outpaced the rise in average earnings for the past 20 years.

While the government has a number of schemes available to help first-time buyers get on the property ladder, there is a wide belief that they do little to address current supply issues. Plus, some even feel that house prices would be lower without any Government help at all.

For example, according to estate agents Moving City, the government’s Help to Buy scheme was shown to ‘significantly’ contribute to house price inflation following its launch. 

What’s the deal with 40-year mortgages?

Towards the end of last month, Kensington Mortgages and Rothesay teamed up to start offering a 40-year mortgage. The ‘Flexi Fixed for Term’ mortgage allows borrowers with a 40% deposit to fix at 3.34% for four decades.

While 40-year mortgages have been offered by other providers, including Nationwide and Santander, Kensington’s new offering shines the light on the fact that longer mortgage terms are becoming more popular.

It’s worth knowing that while many providers offer 40-year mortgages, they remain uncommon. That’s because, aside from poorer rates compared to shorter terms, many banks restrict ultra-long lending to younger borrowers. For example, both Nationwide and Santander limit their 40-year products to those aged 35 or under.

How can longer mortgage terms impact house prices?

While some may feel that 40-year mortgage terms can give first-time buyers a much-needed lifeline, others are keen to highlight that these products make houses even more expensive, given the fact that longer mortgages are cleared at a slower rate than typical terms.

As David Hollingsworth, associate director of communications at L&C Mortgages, explains, “Structuring a mortgage over a longer term than the once traditional 25 years will reduce the monthly outgoing and therefore appeals to those that want to build in a bit of breathing space in their monthly budget.

“However, the downside is that the longer repayment period means that you eat into the debt more slowly and end up paying potentially tens of thousands of pounds more versus a shorter term.”

While Hollingsworth admits 40-year terms can help with affordability, he says they shouldn’t necessarily be the first port of call. He explains, “Whilst [40-year terms] can help from an affordability perspective, in the early stages it’s important to keep reviewing that approach.”

It should be noted that one reason behind high house prices is the availability of cheap credit. Therefore, longer mortgage terms may lead to higher house prices. That’s because their introduction increases the number of people able to afford a home. This essentially creates greater competition for the UK’s finite supply of housing stock, pushing up prices. 

In other words, making house prices more affordable, without addressing supply issues, can lead to higher house prices.

Will house prices crash in 2022? If you’re looking to buy a home, see our article that explores whether house prices are likely to crash in the near future.

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Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.

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Investing responsibly is quickly becoming the path of choice for many investors. In 2021, money continues to pour into these kinds of investments month after month. And there are no signs of inflows slowing down anytime soon!

Here’s why so much cash is being put into this type of investment and what we’re likely to see in future as a result.

What does investing responsibly mean?

You say tomato, I say tomato. That saying doesn’t appear to make as much sense written down, but you know what I mean.

Everyone has a different definition of what they think is ethical or responsible. Evel Knievel believed it was responsible to jump over cars with a motorbike and I think it’s irresponsible to ride a bicycle on gravel. It’s all about perspective.

Recently there’s been a general sway towards investments thought of as less harmful. In some cases, this socially responsible investing (SRI) means using ESG investing methods. In others, it simply means putting cash into firms trying to improve the world in some way or avoiding fossil-fuel businesses.

But whatever way you look at it, investors are just being more conscious about where their money is going. Investing is no longer all about profit and growth at any cost. This wide and sweeping change in attitudes is quickly altering the whole landscape of money.

How much is going into responsible investments?

According to the latest data from the Investment Association, a whopping £1.5 billion was put into responsible funds during October!

Emma Wall, head of investment analysis and research at Hargreaves Lansdown, explains these big figures: “Responsible funds continue to see significant inflows from retail investors keen to do good and make money at the same time.

“With an extra £1.5 billion invested in October, this now takes the total invested in responsible funds to £88.7 billion. It is small fry compared to the wider market, at just 5.7% of funds under management, but making inroads.”

Will this trend of responsible investments continue?

Although responsible funds are swelling in popularity, the bulk of investors’ money can be found elsewhere in the markets.

However, this means that there’s a lot of potential for these funds to grow as investors rotate some or all of their holdings into more ethical investments. Here are the two big topics on people’s minds right now:

• Climate issues
• The coronavirus pandemic

The awareness of big global problems coupled with lots of younger investors joining the market means there’s no reason for these responsible trends to slow down anytime soon.

What may lay ahead for investors?

You now have more control than ever over where you invest your money. It’s an exciting time to be an investor and although some companies and industries may fizzle out over the coming years, new ones will rise up to take their place.

Using one of our top-rated share dealing accounts, you can find the responsible stocks and funds that suit your goals. It’s also worth using something like the Hargreaves Lansdown Stocks and Shares ISA for your investments. This type of account is a great way to protect any gains from tax.

Just remember that no one can predict the future. When it comes to investing, you may get out less than you put in. So be sure to do your research and always have a long-term plan to help you on your journey.

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Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.

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Whether you like Christmas pudding or not, its grand entrance pretty much always garners lots of oohs and ahhs. After all, it’s not often we intentionally set food on fire and then stand back to admire it. But if that wasn’t strange enough, there’s all the trinkets and tokens inside the Christmas pudding itself – including money. Here’s what it’s all about.

Why does Christmas pudding have money in it?

Traditionally, Christmas pudding has a sixpence hidden inside it.

If you get the sixpence in your portion of pudding, then you’ll have good luck over the coming year. Traditionally, other tokens can also be included, each one with its own meaning. As Hercule Poirot discovered in The Adventure of the Christmas Pudding, if a man finds a button, he is destined to be single for the next year. Women who find a thimble share the same fate.

In contrast, if you find a ring in your Christmas pudding, you’ll get married within the year. Find an anchor trinket and you’ll be protected and safe – for the next 12 months at least.

As for pouring brandy and setting it alight, the flames are meant to represent the power and love of Jesus. While some interpret the holly as a symbol of the crown of thorns.

Why do we eat Christmas pudding?

Like with most things, we’ve got the Victorians to thank for Christmas pudding as we understand it now. However, it’s thought to date far further back, possibly to medieval times when a type of milky porridge with dried fruit and nuts was eaten as a fasting dish in the runup to Christmas.

Later, it evolved to include trinkets, which was an idea that came from the Twelfth Night cake eaten at the end of Christmas. But instead of lovely shiny tokens, you’d either get a dried bean or a dried pea.

As bizarre as that might sound, similar traditions can be found in other cultures too. For example, in Spain, they celebrate 6 January as ‘El Día de Los Reyes Magos’ (day of the three kings) with a ‘roscón de reyes’ (king’s cake). It’s a little like brioche with candied fruit. This also includes a trinket, such as a crown, which is the token you want to find. If you’re unlucky, you might get the dried bean token instead.  

Can you still get a sixpence to put in Christmas pudding?

Yes, you can. Although sixpences are no longer in circulation, you can buy special editions from the Royal Mint if you fancy resurrecting this particular tradition.

Traditionally, you should make your Christmas pudding on the last Sunday before advent (basically, the Sunday closest to the end of November). This was also known as ‘stir-up Sunday’ as families would stir up their puddings in readiness for the coming festivities.

You might also have heard Christmas pudding called plum pudding. The dessert confusingly doesn’t contain any plums and it never has. It’s just that ‘plum’ was used to describe any dried fruit.

So, the next time someone wheels out a Christmas pudding, you’ll be able to astound them with your expert knowledge. Just watch you don’t crack a tooth on that sixpence.

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Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.

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The UK stock market has a reputation for being a good source of dividend income. Most of these high-yielders are in the FTSE 100. Today, I want to look at five lead index shares with high yields of 7% or more that I think could perform well in 2022.

I’d be happy to buy all of these shares for my portfolio, as my analysis suggests the dividends they offer should be sustainable. But it’s important to remember that dividends are never guaranteed. Even healthy companies can sometimes cut, or suspend, their payouts, as we saw last year.

I reckon this 9% yield is too cheap

My first pick is FTSE 100 tobacco group Imperial Brands (LSE: IMB). When CEO Stefan Bomhard took charge last summer, he made the decision to focus on the group’s core brands, such as JPS, West and Gauloises. Spending on next-generation products such as vapes has been cut.

These changes seem to be working. Imperial’s operating profit rose by 15% to £3.1bn last year, while net debt fell from £11.1bn to £9.4bn.

I don’t expect much long-term growth from my Imperial shares. I’m also aware the continued decline in smoking rates and the risk of tougher regulations could hit sales in the future. However, I think these risks are already priced into the stock.

Imperial Brands currently trades on just six times forecast earnings, with a 9.1% dividend yield. As a pure income play, this stock remains a buy for me.

My top housebuilder

Next on my list is housebuilder Persimmon (LSE: PSN). Although the stamp duty holiday has now ended, this business is still seeing strong demand for new homes.

CEO Dean Finch recently said that the number of sales reservations per new home site is currently 16% ahead of 2019. Finch expects the number of homes completed this year to be 10% higher than in 2020.

Persimmon already has £1.15bn of forward sales reserved from 2022 onwards, suggesting that next year’s results should be fairly stable.

Profit margins remain high at this business, despite rising labour and material costs. There’s no debt and Persimmon reported a cash balance of £895m at the end of October. I think this should provide good support for this year’s expected dividend of 235p per share, giving a forecast yield of 8.4%.

The only big risk I can see here is that market conditions will slow drastically, leading to a fall in house prices and lower sales. Rising interest rates seem the most likely trigger for this, in my view. But, so far, there’s not much sign of this. I remain happy to hold Persimmon.

A little-known FTSE 100 7%-er

You may not be familiar with FTSE 100 insurer Phoenix Group (LSE: PHNX). Until recently, this retirement group specialised in buying existing insurance policies from other insurers. However, Phoenix is now expanding into new business areas, selling products under the well-known Standard Life brand.

The company’s half-year results showed £412m of new business, compared to £358m last year. So there’s some growth, but it’s still early days.

I think the main risk here is that Phoenix won’t be able to generate enough new business to replace the income from older run-off policies.

However, the company’s track record over the last few years has been good. Phoenix has met management targets and generated plenty of surplus cash. For now, the stock’s 7.5% dividend yield still looks safe to me.

A miner offering 10%

Shares in FTSE 100 mining group Rio Tinto (LSE: RIO) hit a record high earlier this year when the price of iron ore soared to more than $200 per tonne. Things have calmed down a bit, and Rio’s share price has fallen 30% from its April peak.

I think this heavyweight miner is starting to look better value. Low costs mean that profits are expected to stay strong next year, even as commodity prices cool. Broker forecasts at the moment suggest shareholders could receive a 10% dividend yield in 2022.

For me, the main risk is that the shares are still too expensive to ride out a serious mining downturn. However, we might not see that scenario again for several more years. In the meantime, I expect Rio to remain highly profitable. On balance, I think Rio shares look reasonably-priced for income.

Unpopular but too cheap?

My final pick is telecoms giant Vodafone Group (LSE: VOD). It’s best-known in the UK as a mobile phone operator. But in Europe, Vodafone is also a big broadband provider, while in Africa, it operates one of the biggest mobile money services.

Vodafone boss Nick Read has streamlined the business. He’s now focused on more profitable growth opportunities, such as digital services.

It’s a tough balance to strike, because spending requirements are already high as the 5G rollout continues. Read has to juggle debt repayments, dividends, and new investment. If he gets the balance wrong, he might have to cut the dividend.

No investment is ever completely safe, but I’ve followed Read’s progress since he took charge and, so far, I’ve been impressed. For this reason, I’d still be happy to buy Vodafone stock — which offers a 7% dividend yield — for my portfolio.

An easy route to passive income?

I’d be happy to buy all of these FTSE 100 dividend stocks for 2022. But as I mentioned at the top of this piece, dividends are never guaranteed.

For this reason, I would never rely on just five dividend shares to provide a passive income. A single cut could have a big impact on my overall portfolio income. What I do instead is to run a dividend portfolio with 20 stocks. That way, any single cut should only have a small impact on the total income from my portfolio.

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Christmas is a time of goodwill, and it’s become a tradition for employers to throw away the ‘bah humbug’ and dip into their pockets to reward their workers for a job well done throughout the year. So if your boss is more a Christmas Carole and less of a Charles Dickens, then what exactly should you do with it?

One of the toughest things to know is where to start. So first things first, as a broad principle you could start with the 80-20 rule. Or in other words, £8 in any £10 received should be put towards your financial future. Which means if you receive the average year-end bonus of £1,600 then you’d be looking at £1,280 to be sensible with.

Cover the Ghost of Christmas Present

So now that you know how much we’re talking about, what’s the first thing you should do? Well, if you don’t have an “emergency fund” then I suggest you start there. At an absolute minimum you should be looking to have 3 months of living expenses held in a short-term deposit account that you could get your hands on quickly if life throws something unexpected at you. Ideally, that would be 6 months. So if your monthly outgoings were £1,000 then you’d be looking at between £3,000 and £6,000 in your emergency fund.

Don’t forget about Ghosts of Christmas Past

If you’ve already got that one covered, then the next thing you should be looking at is paying down any debts you have. If you’ve got any credit card debt, then it’s a very smart idea to look at that as money you’ve already spent your bonus on and to pay that off. That’s especially true if you’re only paying the minimum amount on your credit card every month. While we’re on the subject of credit cards, you could look at using part of your bonus to pay for a “balance transfer”, where your credit card debt is moved to another card provider. Depending on your circumstances, you could even transfer to a 0% interest card, which would mean every £1 you paid off would go to reducing your debt rather than paying the bank interest.

Paying down debt doesn’t just mean credit cards. If you’ve got a mortgage, you could overpay on that too and potentially get a benefit. If you’re thinking about this, it’s worth speaking to your mortgage provider as not all mortgages are created equal and there may be penalties associated.

Look to the Ghosts of Christmas Yet to Come

The other option is to look to invest your money to hopefully bag an even bigger windfall in the future. One of the least considered ways to do this is to put that into your pension. This is especially effective if you’re a higher rate taxpayer. Chances are the tax relief you’d receive will make the ‘bonus’ even bigger, and the further away from retirement you are the bigger difference that would make to you. Think of it as giving yourself a much, much larger bonus when you retire.

The alternative is to think about investing in an Index Tracker. If you’re not used your ISA for this year, it’s a great way to invest and avoid paying any tax on the gains. If you’ve never bought stocks and shares before, it’s one of the better ways of dipping your toe into the market.

And as for what’s left after you’ve done all of the above? Well, go and do something Foolish, you’ve earned it!

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Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.

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