First-time buyers opting for lengthy mortgage repayment terms
February 12, 2023 by Mark
Home owners
New data covering the third quarter of 2022 has revealed that over 50% of those purchasing their first home during that period opted for mortgages with repayment terms of 30 or more years.
This data came from the Q3 UK Finance Household Review and also showed that around 25% of people moving to a new property had chosen this form of very lengthy mortgage repayment term. By way of contrast, the numbers of first-time homebuyers and movers who did so 10 years ago were about 25% and 10% respectively.
UK Finance is stating that the amount of borrowers opting for loans with longer terms of repayment has been steadily increasing since the financial crash of 15 years ago, but that the recent COVID-19 pandemic saw the figure spike sharply. The main reason being cited for this is that longer repayment terms make the monthly mortgage payments more affordable.
For that reason, the risk of mortgages defaulting is reduced, although UK Finance has also pointed out that it may make it harder for people to save for their retirement as they will still have mortgages to pay off by that stage in their lives.
It went on to point out that these developments could also have wider effects on society, as well as just the individuals that will be affected over the coming years.
Whether it is better to take on a long repayment term or seek more affordable loans is something that advisors with CeMAP training can help borrowers with in order to make informed decisions about.
Written by
Mark
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