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Borrowers turn to 35-year mortgages to cope with rising house prices

Samantha Partington
Written By:
Samantha Partington

Families resorting to stretching their mortgage debt over 35 years or more to cope with rising house prices have reached a three-year high.

The number of mortgages taken out with terms of 35 years or more has risen 70 per cent year-on-year, discounting 2020, with 25,112 long-term deals sold in March this year. In March 2019, 14,765 deals with mortgage terms of 35-years or more were sold. In March 2018, 14,683 long-term mortgages were sold.

A response to a Freedom of Information request submitted by Quilter revealed mortgages with a term of 35 years or more now stood at a three-year high.

Quilter’s mortgage expert Charlotte Nixon said the removal of stamp duty on the first £500,000 of a property purchase price between July 2020 and June 2021 combined with savings amassed by families during lockdowns has allowed many buyers to purchase higher cost homes.

She added: “Ultimately, this rush to buy has pushed house prices up significantly across the country and may have contributed to the upswing in buyers opting for longer term deals.

“For some borrowers, particularly first-time buyers, securing a mortgage with a 35-plus year term could be the only way to afford a property due to the lower monthly repayments. However, it is important that the risks of such long mortgage terms are properly understood.

“One of the largest knock-on effects of securing a mortgage with a term of 35 or more years is that the longer the mortgage term, the older you will be when making the final repayment. This means that people are likely to be borrowing beyond their retirement age. Whilst some mortgage providers allow this, paying a mortgage in retirement can have a major impact on standard of living with many people becoming unable to comfortably afford the repayments.

“Additionally, whilst a mortgage with a term of 35 or more years can result in lower monthly repayments, you are likely to pay considerably more in interest over the course of your mortgage term.”

Nixon says borrowers should speak to a mortgage adviser if they want to stretch their debt over a long term so they can find a deal that offers overpayments without penalties.