Whether you’re a homeowner or just looking into getting on the property ladder, you will know that mortgages typically have a standard maximum term of 25 years.
But research from Moneyfacts.co.uk claims that 50.89 per cent of all residential mortgage products currently available have a longer term of 40 years – up from 35.93 per cent five years ago.
In fact analysis revealed the numbers of products available with maximum 25-year or 30-year terms have fallen dramatically over this period of time.
Hiten Ganatra, Visionary Finance Managing Director said: “The number of 40-year mortgages has been a significant change caused by the current economic landscape.
“Many homeowners are looking to reduce their monthly repayments by increasing the maximum term of their mortgage.
“But although in the short-term borrowers may think they have more money in their pockets, they are at risk of being hit with a hefty sum of additional interest.
“It also means that it will take a lot longer to own their own home after paying off their mortgage and could even mean they’re still paying it off after retirement.
“However for some, this option means that a 40-year mortgage gives borrowers a more likely chance of owning their own home. Others will have more expendable income to play with every month, while at the same time still being firmly on the property ladder.”
The prospect of retired homeowners depending on their pension to pay off their mortgage is becoming more common.
The average age of a first-time buyer is now considerably older, meaning they have less time to pay off their mortgage before retirement.
A new retirement interest-only mortgage deal launched last week, giving people over the age of 55 who are receiving pension income the chance to secure a loan.
You can borrow up to three and a half times your income and the property must be worth at least £125,000.
For expert advice give our experienced advisers a call. We’re a fee free, independent mortgage lender with access to more than 50 different high street and specialist lenders. Give our team a call on 01908 465100 or email firstname.lastname@example.org.
Moneyfact’s key findings
- There are currently 2,604 mortgages with a maximum 40-year mortgage term compared to 1,096 in March 2014.
- The number of 25-year maximum term mortgages has fallen by 152 in the same time period. That means the traditional mortgage term now only accounts for 2.97 per cent of all residential products available (down from 7.54 per cent).
- A total of 71 per cent of all residential mortgages are now expected to end when the borrower is 75 years or older, in comparison to 52 per cent five years ago.
- Those choosing smaller payments over a long period of time risk costly interest rates. Moneyfacts reports a £200,000 repayment mortgage at a rate of 2.50 per cent over 40 years in comparison to 25 results in an additional £47,419 in interest.