One in four first-time buyers on the housing market takes out a mortgage with a term of 35 years or longer, while borrowing costs are rising enormously
- This share reached a new record high when home purchases peaked at the end of 2023
Almost one in four starters has taken out a mortgage with a term of more than 35 years after a sharp increase in financing costs.
Figures from trade body UK Finance show that this share hit a new record high when mortgage rates on completed home purchases peaked at the end of 2023.
It showed that 23 percent of all home loans taken out by first-time buyers had terms of more than 35 years, up from 17 percent a year earlier and just 9 percent when the Bank of England started raising interest rates. end of 2021.
Longer-term mortgages can make monthly repayments more affordable, but in the long run they will create thousands of pounds of additional debt, potentially stretching into retirement.
UK Finance said this was a change from the past, when 25-year mortgages were ‘very much the norm’ (stock image)
The Bank of England started raising interest rates at the end of 2021 (stock image)
Loans with a term of more than 30 years now make up more than a third of starter deals.
UK Finance said this was a change from the past, when 25-year mortgages were ‘very much the norm’.
“We have seen sustained, faster growth in lending for more than 35 years,” a spokesperson said.
‘Where customers use ‘term stretch’ to improve affordability, they must extend the term even further.
“Many borrowers still failed to pass affordability tests, leading to the significant contraction in lending volumes we saw last year.
About five million mortgage holders still had not refinanced their loans at a higher interest rate at the end of last year.
The Bank has increased the interest rate from 0.1 pc. to 5.25 pc, although investors expect the base rate to fall later this year.’