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Sharp rise in first-time buyers taking 30- and 35-year mortgages

Posted 30 January 2017

Growing numbers of first-time buyers are choosing longer-term mortgages to reduce monthly repayments from stretched budgets...

New data from one of the UK's leading lenders has revealed that the days of the traditional 25 year mortgage may be over.

The Halifax have reported a sharp rise in the number of first-time buyers taking their mortgage over a 30- or 35-year term. As the average age of first-time buyers increases, this could mean that more and more people will end up paying off their home loan into their 60s and 70s.

Three in five first-time buyer mortgages are for at least 25 years

Growing numbers of first-time buyers are choosing mortgages lasting 30 or 35 years – suggesting that thousands of borrowers will still be paying their home loan long into their retirement.

The Halifax has reported that, in 2016, more than one in four (28%) of all first-time buyers with a mortgage opted for a 30- to 35-year term. This is a significant increase on the 11% that chose a longer term back in 2006. In its report, the Halifax says that as the cost of a typical first home has risen, there has been a growing trend towards buyers taking out mortgages over longer and longer terms.

In 2006, almost two-thirds (64%) of first-time buyers opted for a term of between five and 25 years, while the remaining 36% chose a term of 25 years or longer. A decade later, 60% of first-time buyer mortgages involve a term of at least 25 years.

Older first time buyers looking to longer-term mortgages to reduce monthly payments

In recent years, high house prices, student debts and a rise in the age at which couples have children, have resulted in an increase in the average age of first-time buyers. Halifax says that the average age of a first-time buyer is now 30, although in London it is 32, and in certain boroughs, such as Barnet and Ealing, and locations such as Slough in Berkshire, it is 34.

Increasing the term of a mortgage from 25 years to 30 or 35 years reduces the monthly repayments, which is often a big consideration to people stretching their budget in order to get into the property ladder. Halifax offers mortgage terms of up to 40 years and says that with a repayment mortgage, the longer the term, the lower the monthly payment. 

However, an increased mortgage term results in higher payments overall. The lender warns potential borrowers: “It will take you longer to pay off the loan, so you will pay more interest. This means it will cost you more over the life of your mortgage.”


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