Julia Harris, analyst at moneyfacts.co.uk, explained: “A mortgage for most of us will represent the largest and longest financial commitment of our lives. For many years the standard term considered for a mortgage in the UK was 25 years, but as affordability becomes increasingly difficult for many of today’s first-time buyers, a 25-year term is perhaps no longer considered sufficient.
“As house prices rises show no signs of abating, today’s buyers face two major obstacles. First, being able to borrow the amount needed to purchase the property and second, being able to afford the monthly repayments. Actions taken by lenders in the last 12 - 18 months show that they understand the difficulties that potential buyers face. Many have reacted by offering enhanced income multiples, group mortgages, interest only loans and participation in government schemes to assist first-time buyers with what is now a massive leap on to the first rung of the property ladder.
“Most lenders have adopted one relatively simple way to make the repayments more affordable, by extending the maximum term of the loan - to anything up to 52 years. By spreading the mortgage over a longer period of time, monthly repayments can be reduced to a more affordable level.
No of years / No of lenders / Percentage of lenders
25 / 33 / 20.12 per cent
30 / 47 / 28.66 per cent
35 / 28 / 17.07 per cent
40 / 44 / 26.83 per cent
45 / 3 / 1.83 per cent
49 / 2 / 1.22 per cent
52 / 7 / 4.27 per cent
“A moneyfacts.co.uk survey reveals that eight out of ten lenders now offer maximum mortgage terms in excess of 25 years. A quarter of lenders are now offering a 40-year mortgage term and a handful offering the maximum possible term of 52 years. It’s a frightening thought to think you could potentially be forking out for that hefty monthly mortgage payment from the moment you turn 18 until the day you retire at 70.
“Extending the term of your mortgage will undoubtedly lower your monthly repayments and can be a useful means of initially affording the mortgage until your salary increases, but the longer you stay on a long term mortgage, the more you will see your interest costs spiral.
“Based on a 25-year repayment mortgage of £130K at 5.25 per cent, extending the term by just five years will increase the total amount payable by almost £25K, while increasing to 40 years adds a whopping £77.5K interest to your bill.
“On a recent moneyfacts.co.uk user poll, 38 per cent of people (669 from 1,600 respondents) searching for a mortgage said they were looking for a mortgage term of more than 25 years.
“The key to reaching the much sought after status of mortgage-free living is to take control of your mortgage, overpay whenever you can and make sure you review your mortgage deal on a regular basis.”
