Over half of mortgage borrowers now opt for a 30-year mortgage or longer 

Research shows that half or mortgage borrowers now opt for a 30 year mortgage term, and an increase has been seen across all residential purchase and re-mortgage customers as the average property now costs seven times that of the average salary.

Uswitch has partnered with online mortgage advisors Mojo Mortgages to uncover how the average mortgage term lengths have changed in the last few years.

Their findings have shown that in 2021, 41% of mortgage borrowers chose a term of 30 years or longer, however, this increased to over half (51%) last year.

Kellie Steed, the mortgage expert at Uswitch said:

“According to the Zoopla house price index, the current average property value in the UK is £264,500, which means someone on an average salary (£34,900) would need to borrow more than 7 times their annual salary to take out a large enough mortgage to buy it. The vast majority of lenders cap their lending way below this, at around 4-5 times annual income.

“It’s unsurprising, therefore, that many are resorting to ‘mammoth mortgage’ terms in order to stretch their affordability to the absolute maximum. However, first-time buyers are not the only ones affected. There has been a less significant, but certain increase in average mortgage term lengths across the board since the Bank of England base rate began to rise in December 2021.”

“Put simply, the longer your mortgage term, the smaller your monthly repayments. Borrowing the same amount over a longer term stretches your affordability, potentially reducing unaffordable monthly repayments to affordable ones.

“After analysing Mojo Mortgages’ data, we can reveal that in 2023, the average first-time buyer borrowed £189,693 at an interest rate of 5.27, over a term length of 29 years. Their monthly mortgage repayments stood at £1,065.

“However, if they were to extend their mortgage terms to 40 years, this would decrease their mortgage payments by £116 per month.”

There are ‘pros and cons’ to having a long mortgage term, according Uwsitch, who say that a 30-year term can ‘aid affordability and allow buyers to purchase sooner’, in the case of re-mortgaging it could ‘reduce monthly outgoings’. However, Uswitch warns that ‘the longer the term the more interest a buyer pays’ and there’s a ‘risk of repaying mortgages into retirement’, this also means a slower equity growth.

Steed said:

“In some cases, waiting until you can manage a shorter mortgage term may allow you to save money overall. However, life isn’t usually straightforward and waiting won’t be an option for everyone.

“It’s a good idea to seek advice from a mortgage expert, however, when determining the pros and cons of taking out a very long mortgage term. They’ll be able to assess your individual circumstances and recommend your best way forward, whether you decide it’s best to wait or not.”

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