Mortgage blog: First-time buyers paying thousands with longer-term mortgages

Posted 14 February 2014

New research from a leading lender has found that more and more first-time buyers are taking out their mortgages over more than the standard 25-year term. A majority of new borrowers now take their mortgage over a period of longer than 25 years, a situation that would have been unheard of just ten years ago.

While this helps cash strapped buyers to afford their monthly repayments it can mean that they pay thousands of pounds more interest over the term of the mortgage.

Average first-time buyer loan now 28 years

According to figures from the Council of Mortgage Lenders, the average first-time buyer now takes out a loan over a term of 28 years. In the past lenders would have been reluctant to agree a term longer than 25 years but now Halifax, Lloyds and Nationwide have a maximum term of 40 years while Santander, Barclays and Royal Bank of Scotland offer loans for up to 35 years.

Robert Gardner, chief economist at the Nationwide, said: "There is a trend towards borrowers lengthening the term of their mortgage. At present, 52% of mortgages [lent to first-time buyers] are currently over 25 years, up from 40% in 2007. This may, in part, be to lower their monthly repayments, though the shift may also reflect that people are both living and working for longer."

Many borrowers are choosing to take out a longer term to keep their repayments down in the absence of an interest-only option. While the monthly repayments on a longer-term mortgage are cheaper, the total cost of the borrowing can end up being tens of thousands of pounds higher.

The Daily Mail cites the example of a couple taking out a £100,000 mortgage with an interest rate of 4%. With a 25-year deal, their total interest bill is £58,351 but with a 35-year deal, the total interest bill jumps to £85,965.

Keith Osborne, editor of, said: "Borrowers are keen to take their mortgage over a longer term in order to keep their repayments down. However, as the average age of a first-time buyer rises they then start to face problems with a lender's cap on the maximum age. For example, a 38-year-old first-time buyer couldn't take out a 35-year mortgage with a lender who insists that the mortgage must be repaid by the age of 70."

The problem seems to be restricted to first-time buyers. People moving home typically take out a loan lasting for around 22 years while remortgage borrowers typically choose an 18-year deal.

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