An increasing number of first-time buyers are opting for a longer mortgage term than the previous average of 25 years.
As property prices continue to climb far faster than wage growth, more people are opting for the longer term of 35 years, and even longer in some cases. Although this helps buyers onto the property ladder, there is also a risk that borrowers will still be paying off their mortgage during retirement.
According to figures released from The Money Charity, around 15% of mortgages are taken over a term of 35 years, in comparison to 2005, when just 2.7% of mortgages were taken over a longer term. According to one broker from L & C Mortgages, David Hollingworth, interest only mortgages were previously used to reduce repayments. However, only those with a large salary and deposit are likely to be accepted for an interest only product. The drawback to a mortgage over a longer term is that it costs thousands more over the term of the mortgage.
As people become first-time buyers at a much later age than previously, there is now a higher risk that a borrower could be left paying the mortgage during retirement. Another worry is that home owners with a longer-term mortgage will not have the opportunity to save towards their pension. CeMAP qualified mortgage advisors are able to help buyers to find the best mortgage to suit their requirements, keeping the costs as low as possible.