With around half the mortgage lenders in the UK now offering a 40-year mortgage, we are finding that longer-term mortgages are becoming the “new normal”, particularly for first-time buyers.
With the population not only living but working longer too mortgage lenders are moving with the times and adapting their products to suit the needs of home buyers as we are seeing a move away from the traditional 25-year term which has been the mainstay of the UK’s mortgage market for generations.
Independent mortgage monitor Moneyfacts have reported that just over five years ago only a third of all mortgage products available to potential home buyers in the UK had terms up to 40-years, whereas the current market has over 50% of all mortgage product offerings at this term.
What does this mean for home-buyers?
Well particularly for first-time buyers it can signal the first step on to the property ladder. As Moneyfacts state in their report by extending the typical mortgage term borrowers may be able to reduce their monthly repayments significantly and therefore buy the property that suits their needs in the location of their choice and still meet lenders strict affordability requirements. Further to this Moneyfacts reported that it appears that mortgage providers are also permitting the extension of maximum mortgage terms of up to 40 years in conjunction with the extension of the maximum age that a borrower may be at the end of the term of the mortgage. The research showed that currently, 71% of all UK residential mortgages can end when the borrower is 75 years of age or older. This is a seismic change in the marketplace that will assist borrowers already on the property ladder too as only five years ago this figure stood at 52%.
The Pros and The Cons
Whilst of course with a longer-term mortgage the monthly repayments are reduced and therefore more affordable, however, the interest is accrued over the lifetime of the loan and therefore the total interest repayment will be higher unless you can work towards paying the mortgage off sooner than the 40-year timeframe. This can, therefore, result in a 40-year mortgage becoming a handy cashflow tool. It is worthwhile ensuring that the product you take out has no penalties for overpayments and allows you the flexibility to pay it back sooner.
A 40-year mortgage is one of many new options in the market place and could well be perfect for you to get that first foot on the property ladder or to move to that bigger house to accommodate the needs of your growing family. It is always worth seeking the advice of an independent financial advisor to ensure that you do your homework and choose the best option for you and your future.
The Next Steps
Once you have your budget in place the team here at Oakley Residential can help you find that ideal home and start your journey on or up the property ladder. Give us a call on 01273 688881 or visit our website www.oakleyproperty.com for more information.