Yahoo Finance First-time buyers turning to 35-year mortgages amid higher interest rates
Record house prices and higher mortgage rates have pushed first-time buyers into taking out loans into retirement.
One in five first-time buyers took out a mortgage of at least 35 years in 2023, compared with fewer than one in 10 in 2022, according to banking trade body UK Finance. Previous generations tended to borrow over a 25-year term.
The average age of a first-time buyer is now 34 years old, according to Savills, which suggests many mortgagors will borrow into their late sixties.
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Struggling borrowers often choose longer mortgage terms in order to secure affordable monthly payments. The maximum mortgage term in the UK is 40 years.
However, the Bank of England has warned about the growing risks posed by homeowners taking out longer mortgages as they may struggle with debt in future.
Eric Leenders, managing director of personal finance at UK Finance, said: “2023 was a tough year for UK households and we expect to see continued challenges in 2024. Affordability remains a barrier to home ownership, but pressures should start to ease gradually through this year and next.
“Amidst ongoing cost challenges, it’s encouraging that customers don’t look to be running up higher levels of unsecured debt. But we know some households will be more affected than others — if you are struggling with personal loan, credit card or mortgage repayments, please reach out to your lender as soon as possible for help.”
Mortgages in arrears rose throughout 2023 to 107,250, however, this number still accounts for less than 1% of the total number of outstanding mortgages. UK Finance expects arrears cases to increase in 2024, but not at the same pace as in 2023.
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The number of possessions remained largely flat during 2023, numbering 1,150 in the last three months of last year and 4,620 in 2023 as a whole. UK Finance said that the possessions that are taking place are long-term cases from before the pandemic.
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