Nearly one in four first-time buyers have been signing up to mortgages with terms of more than 35 years after a surge in borrowing costs.
Figures from the trade body UK Finance showed the proportion hit a new record as mortgage rates on completed house purchases reached a peak at the end of 2023.
They showed that 23 per cent of all home loans taken out by first-time buyers stretched for more than 35 years, up from 17 per cent a year earlier and just 9 per cent when the Bank of England started to put up interest rates at the end of 2021.
Longer-term mortgages can make monthly repayments more affordable but over the long run will mean accruing thousands of pounds more debt – potentially stretching into retirement.
UK Finance said it was a change from the past when 25-year mortgages were ‘very much the norm’ (stock image)
The Bank of England started to put up interest rates at the end of 2021 (stock image)
Loans of more than 30 years now make up more than a third of first-time buyer deals.
UK Finance said it was a change from the past when 25-year mortgages were ‘very much the norm’.
‘We are seeing a continued, more rapid increase in borrowing for more than 35 years,’ a spokesman said.
‘Where customers are using ‘term-stretch’ to improve affordability, they are needing to lengthen the term even further.
‘Many borrowers were still unable to pass affordability tests, driving the significant contraction in lending volumes that we saw last year.
Around five million mortgage holders had still not refinanced their loans on to higher interest rates at the end of last year.
The Bank raised rates from 0.1 pc to 5.25 pc, although investors expect the base rate to start coming down later this year.’
