Marathon mortgages of up to 40 years on rise among UK first-time buyers
A standard mortgage used to run for 25 years but experts are reporting a growing trend for marathon loans spread over up to 40 years as first-time buyers and movers opt for lower monthly payments in an effort to bridge the gap between rising living costs and still-high asking prices.
New figures show the number of first-time buyers opting for a mortgage term longer than 35 years more than doubled during 2022 to 17%. The number taking out a loan over 30 to 35 years also increased – from 34% to 38% – during the same period, according to the banking group UK Finance.
This tactic could be one of the reasons why the big drop in property prices predicted for this year has not materialised, with many housing market watchers surprised by its seeming resilience.
“At the moment, young people are in a really tough position because the private rental market is absolutely terrible, with a lack of homes available and rents rising rapidly,” Neal Hudson, a housing analyst at the research firm Residential Analysts, says.
“Despite the fact that mortgages are more expensive now … it is still more desirable to try to become a first-time buyer than stay in the private rental market, if you can.”
The obvious advantage of a longer mortgage term is that it brings down the monthly payments and, indeed, for some first-timers, it may be the only way they can afford to get on to the property ladder at all given the squeeze created by higher living costs, with UK inflation still more than 10%.
The idea of a timeline that could result in you still paying off your mortgage when you have started collecting your pension is not new, with loan periods getting longer in lockstep with rising prices. In 2005, the average term for a first-time buyer was just shy of
Read more on theguardian.com
