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Over half of borrowers took a 30+ year mortgage term in 2023

Over half of borrowers took a 30+ year mortgage term in 2023
Shekina Tuahene
Written By:
Shekina Tuahene
Posted:
17/05/2024
Updated:
17/05/2024

Over half of mortgage borrowers – 51% – took out a mortgage with a term of 30 years or longer, analysis from a comparison site revealed.

Based on applications submitted through online adviser Mojo Mortgages, Uswitch found that this was a rise from 41% of borrowers who selected a mortgage term of 30 years or longer in 2021. 

It was found that average mortgage terms among residential, remortgage and buy-to-let (BTL) purchase customers had all increased. 

This had risen by a year since 2021 for first-time buyers to an average of 29 years, as well as homemovers who had average mortgage terms of 26 years by 2023. 

Remortgage borrowers had an average mortgage term of 23 years in 2023, higher than 2021’s 21 years, while BTL borrowers stretched their average mortgage terms from 23 to 24 years. 

An affordability challenge 

Uswitch said this was an affordability problem, as the latest Zoopla data suggested average house prices were worth seven times the typical annual salary. 

Kellie Steed, the mortgage expert at Uswitch, said: “According to the Zoopla house price index, the current average property value in the UK is £264,500, which means someone on an average salary of £34,900 would need to borrow more than seven times their annual salary to take out a large-enough mortgage to buy it. The vast majority of lenders cap their lending way below this, at around four to five times annual income.

“It’s unsurprising, therefore, that many are resorting to ‘mammoth mortgage’ terms in order to stretch their affordability to the absolute maximum. However, first-time buyers are not the only ones affected. There has been a less significant, but certain, increase in average mortgage term lengths across the board since the Bank of England base rate began to rise in December 2021.” 

Steed said longer mortgage terms could help borrowers with affordability as data from Mojo Mortgages suggested monthly payments could be reduced by more than £100. 

She added: “Put simply, the longer your mortgage term, the smaller your monthly repayments. Borrowing the same amount over a longer term stretches your affordability, potentially reducing unaffordable monthly repayments to affordable ones.

“After analysing Mojo Mortgages’ data, we can reveal that in 2023, the average first-time buyer borrowed £189,693 at an interest rate of 5.27% over a term length of 29 years. Their monthly mortgage repayments stood at £1,065. 

“However, if they were to extend their mortgage terms to 40 years, this would decrease their mortgage payments by £116 per month.” 

In 2021, Mojo Mortgages was acquired by RVU, the parent company of Uswitch.