Despite the recent market slowdown bringing wages more in line with property prices, there is increasing demand for the mortgage market to offer more 40-year mortgage terms.
According to data from Santander Mortgages, around half of first-time buyers would consider a 40-year loan in order to reduce monthly repayments and make housing affordability stretch a bit further.
In 2018, 51% of all residential mortgages had a standard maximum mortgage term of 40-years, this has increased from 36% in 2013 which could mean that more people could begin to achieve home ownership through the increased mortgage length.
The report claims that extending the length of a loan to 40-years could enable 3.25 million access home ownership when they would be otherwise priced out of the property market, with an average monthly saving of £263.
Over the term of a 40-year mortgage, it is speculated that people, that would have been trapped in private rent over this period, could save over £170,000 if they were able to make the jump from renting to buying through this extended means.
The report claims that although first-time buyers could exploit the longer mortgage term to gain a foothold on the property ladder, many prospective owners would change their mortgage terms when they are in a position to remortgage.
23% of respondents would look to remortgage to a shorter term, 18% would look for a shorter mortgage term when they second-step up the ladder and 37% would look to overpay on their mortgage whenever they could to reduce the term.
Miguel Sard, Managing Director of Mortgages at Santander UK, commented:
“The possibility of owning a property may seem like a distant dream to some aspiring buyers, many of whom have found themselves locked in a ‘rent trap’ and unable to get onto the property ladder. By offering buyers the option of a longer-term mortgage, our aim is to address some of the affordability restrictions they face and support them in buying a home with more manageable monthly repayments.”
Have conveyancers noticed more buyers exploiting a longer loan term in order to meet affordability criteria? Would this standard mortgage term unlock property ownership to over 3 million additional households?
