But experts warn of long-term financial risks and retirement repayment burdens
First-time buyers facing affordability challenges may find financial relief through 40-year mortgage terms, according to new research from price comparison site Moneyfacts.
The analysis indicates that extending a mortgage from the standard 25 years to 40 years can significantly reduce monthly repayments, though it leads to higher overall interest payments.
Borrowers taking out a £250,000 mortgage at the average rate of 5.05% could save £255 each month by opting for a 40-year term instead of a 25-year term. The flexibility of longer terms allows borrowers to make overpayments when possible, which can shorten the loan period and decrease the total interest paid.
“If borrowers with a 40-year term can afford to overpay by £200 per month, it could shave almost 13 years off the mortgage term, saving them around £123,000, Rachel Springall (pictured), finance expert at Moneyfactscompare.co.uk. “Typically, lenders allow borrowers to overpay by 10% of their outstanding mortgage, but some may allow more.
“A maximum mortgage term of 25 years would have been relatively standard in the past, particularly when house prices were lower, but the majority (68%) of first-time buyers are now taking out mortgages with a term of 30 years or more, according to the Financial Conduct Authority.
“Affordability remains a key issue and it’s stretching new buyers, with the Bank of England noting the average deposit paid by first-time buyers was around 60% of their household income in 2024.”
Springall noted that longer working lives and the desire to enter the property market are driving more borrowers towards extended mortgage terms. “As consumers work for longer, it’s easy to see why the majority (85%) of mortgages allow them to push their term to 40 years,” she said.
“Those prioritising their homeownership plans over their pension may well choose a longer-term mortgage to more comfortably afford mortgage payments. However, being asset rich and cash poor in retirement can lead to borrowers paying their mortgage for longer, incurring more interest and eventually they may turn to equity release to boost their disposable income.”
However, industry observers stress that while long-term mortgages can ease immediate affordability pressures, they carry significant risks. Bank of England staff have cautioned that taking out mortgages later in life could contribute to a retirement debt crisis, as older borrowers may still be repaying loans well into retirement. Although the UK market has seen more long-term mortgage options, uptake has declined sharply.
Most borrowers continue to favour shorter two- or five-year fixed rate deals, citing high interest rates and mistrust of newer lenders. The prospect of locking in a higher rate for decades, especially when interest rates may fall, has further dampened demand for long-term fixes.
Springall said borrowers sholud seek professional advice, regularly review their financial situation, and avoid assuming that future circumstances will automatically resolve long-term debt. Responsible lending and careful personal financial planning are seen as essential to managing these risks effectively.
She added that changes to loan-to-income rules and ongoing reviews of stress testing are important for protecting borrowers in a shifting market. She also highlighted the continuing shortage of affordable homes, noting that many first-time buyers are hoping the government will meet its goal of building 300,000 new homes annually.
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