House buyers opt for longer repayment terms

May 10, 2016 by Brendan O'Neill

Home owners

According to a report released by the Council of Mortgage Lenders (CML), more people are buying a property and re-mortgaging, with movers looking for longer repayment terms.

Almost 60% of first time buyers are opting for a mortgage term which is longer than the usual 25 years, which is twice the number doing so 10 years earlier. In the report, CML states that the average term for first time buyers has increased from 25 to 30 years. The issue was highlighted recently, as the Halifax announced that it intended to increase the upper lending limit to 80 years old, from its previous limit of 75.

The report highlights that although low interest rates are helping buyers, rising house prices and stricter affordability regulations are impeding progress for many house buyers. For many first time buyers, the property price increase has meant that they need to save a larger deposit to be able to buy, although in many areas, the average wage hasn’t increased.

Some borrowers are requesting mortgage terms of 40 years, which is far longer than the typical 25-year term. Borrowing over a longer term means that monthly payments are lower. However, borrowers will pay more interest over the term and are more likely to face changes in their circumstances, which could affect affordability during that time frame.

Rather than opting for a longer term, buyers are advised to seek professional advice from a CeMAP qualified mortgage adviser, who may be able to suggest an affordable alternative.