A significant portion of young homeowners with new mortgages have chosen longer repayment terms, lasting 35 years or more, in order to make their monthly payments more affordable. This finding comes from Experian, a credit data company.
Experian’s analysis shows that 25% of new homeowners aged 29 and under, between January and March of this year, opted for repayment terms of at least 35 years. In comparison, the historical average was around 10% in January 2020.
Both first-time buyers and movers are increasingly choosing “marathon” mortgages, with lenders offering terms as long as 40 years, to achieve lower monthly payments. This trend stems from the need to bridge the gap between rising living costs and high asking prices for properties.
James Jones, the head of consumer affairs at Experian, remarks, “Our data suggests that people under 30 are opting for longer mortgage terms in order to keep their monthly repayments affordable. This trend may also be impacting property-buying behavior among house hunters.”
Opting for longer mortgage terms means that some individuals will be nearing retirement age or already retired by the time they fully pay off their loans. In the past, a standard mortgage term was 25 years.
Jones expresses concern, saying, “With high interest rates putting pressure on borrowers, young people might feel trapped. We encourage people to explore ways to secure better mortgage terms.”
According to UK Finance, a trade body, a record-breaking 19% of loans taken out by first-time buyers in March had terms of 35 years or more, with over half of these buyers choosing terms longer than 30 years. Additionally, 8% of home movers took out mortgages with terms of 35 years or more.
This assessment reveals the highest proportion of 35-year mortgages since records began in 2005, more than doubling the 9% rate in December 2021 when the Bank of England began raising interest rates from a low of 0.1%.
However, recent indications suggest that the surge in mortgage rates may have reached its peak.
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